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Push or Pull? Performance-Pay, Incentives, and Information

David Rietzke, England and Yu Chen ()
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David Rietzke, England: Lancaster University
Yu Chen: University of Graz, Austria

No 2018-12, Graz Economics Papers from University of Graz, Department of Economics

Abstract: We study a principal-agent model wherein the agent is better informed of the prospects of the project, and the project requires both an observable and unobservable input. We characterize the optimal contracts, and explore the trade-offs between high and low-powered incentive schemes. We discuss the implications for push and pull programs used to encourage R&D activity, but our results are relevant in other contexts.

Keywords: Pay for Performance; Moral Hazard; Adverse Selection; Observable Action; Principal-Agent Problem (search for similar items in EconPapers)
JEL-codes: D82 D86 O31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-des, nep-hrm, nep-mic and nep-ppm
Date: 2018-05
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