Designing Incentives under Multidimensional Performance Measures

Surajeet Chakravarty and Miltiadis Makris

Journal of Institutional and Theoretical Economics (JITE), 2012, vol. 168, issue 4, 687-711

Abstract: We attempt to shed some light on the problem of providing incentives to service providers such as teachers and doctors. Often, outcomes of such services are not verifiable, and this has been cited as a reason for lack of incentive provision. We derive the contract offered by a principal if, in addition to moral hazard, the output of the agent may not be verified. We show that verified high attainment may not be rewarded. In this case, the bonus is increasing in the ability to verify output. We also show that an increase in potential nonverifiability may lead to efficiency gains and be beneficial for the principal.

JEL-codes: D8 J3 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mohrsiebeck.com/en/article/designing-i ... 28093245612804469773 (text/html)
Fulltext access is included for subscribers to the printed version.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mhr:jinste:urn:sici:0932-4569(201212)168:4_687:diumpm_2.0.tx_2-5

Ordering information: This journal article can be ordered from
Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany

Access Statistics for this article

Journal of Institutional and Theoretical Economics (JITE) is currently edited by Gerd Mühlheußer and Bayer, Ralph-C

More articles in Journal of Institutional and Theoretical Economics (JITE) from Mohr Siebeck, Tübingen
Bibliographic data for series maintained by Thomas Wolpert ().