High-powered incentives and communication failure

Ajit Mishra and Sudipta Sarangi

Journal of Economic Behavior & Organization, 2016, vol. 131, issue PA, 51-60

Abstract: This paper uses a donor–provider–agent framework to study the role of provider incentives for the delivery of developmental goods like aid, credit, or technology transfer to the poor. It considers a situation where credible communication by the provider is the key to successful delivery. The study focuses on the interplay between incentives and communications and shows that the use of high-powered incentives can lead to breakdown of communication between providers and agents, leading to undesirable outcomes. However, in many situations motivated providers or state-contingent contracts can be used to achieve the second best outcome.

Keywords: Incentives; Communication; Motivated provider (search for similar items in EconPapers)
JEL-codes: D8 J3 O1 O3 (search for similar items in EconPapers)
Date: 2016
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Working Paper: High-powered incentives and communication failure (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:131:y:2016:i:pa:p:51-60

DOI: 10.1016/j.jebo.2016.08.007

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