The New Soviet Incentive Model: Comment

Steinar Ekern

Bell Journal of Economics, 1979, vol. 10, issue 2, 720-725

Abstract: Elaborating on the analysis of Weitzman and of Snowberger, this article develops four additional comparative statics results for the Soviet incentive model. The article demonstrates how the optimal change in the firm's self-selected target in response to changes in the central planners' parameters crucially depends on properties of the absolute risk aversion function. Extending the model to include preferences over a proportional discretionary bonus, the article shows how the relative risk aversion becomes a key factor.

Date: 1979
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