High-powered incentives and communication failure

Ajit Mishra and Sudipta Sarangi

No 7345, Policy Research Working Paper Series from The World Bank

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. The paper considers a situation where credible communication by the provider is the key to successful delivery. The study shows that the use of high-powered incentives can lead to breakdown of communication between providers and agents, leading to undesirable outcomes. The paper studies the interplay between incentives and communication in the presence of typical and motivated providers and finds that in certain situations incentivization leads to worse outcomes.

Keywords: Education for the Knowledge Economy; Economic Theory&Research; Labor Policies; Technology Industry; ICT Policy and Strategies (search for similar items in EconPapers)
Date: 2015-06-29
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Journal Article: High-powered incentives and communication failure (2016)
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