Incentives for Effort and Truth
11. Incentives for Effort and Truth
Assigned Reading
- Thinking Strategically (Avinash Dixit and Barry
Nalebuff), Chapter 12, Incentives
Central Idea:
The problem in working with other people is to provide the right
incentives.
Antithesis:
The problem in working with other people is to provide inspiring
leadership.
Topics That Might be Discussed in Class
- Incentives for effort-- programmer for Wizard 1.0 example
- Efficiency wages-- programmer for Wizard 1.0 example
- Incentives for truth-- joint venture example
- The five P's of nonmonetary motivation
Terms.
Participation Constraint,
Effort-Choice Constraint (incentive compatibility constraint),
Efficiency wage.
For Next Time
- Thinking Strategically (Avinash Dixit and Barry
Nalebuff), Chapter 11, Bargaining
- Packet: Krishna, Vijay, ``The 1987 NFL Strike'' Harvard case
no. 9-189-093, 9-189-094.
Additional Material
- My overheads on incentives for effort and truth
in
pdf and on the 5 P's in powerpoint.
- Article on the 1996 Nobel Prize
Winners in Economics.
- Rasmusen, Eric. "A Theory of Trustees, and Other Thoughts,"
in
Public Debt and its Finance in a Model of a Macroeconomic Policy Game:
Papers Presented at a Workshop held in Antalya, Turkey on October 10-
11, 1997. , ed. by Tahire Akder. Available in
Acrobat (*.pdf). On the 5 P's of nonmonetary motivation.
- Rasmusen, Eric. ``An Income-Satiation Model of Efficiency
Wages,''
Economic Inquiry (July 1992) 30: 467-478.
Available in Acrobat (*.pdf).
On why you might want to pay generous wages.
- Rasmusen, Eric and Todd Zenger, ``Diseconomies of Scale
in
Employment
Contracts,''
Journal of Law, Economics and Organization (June
1990),
6: 65-92.
Available in
Acrobat (*.pdf).
On why larger organizations are less effective.
- Paul Milgrom and John
Roberts.
Economics, Organization, and Management,
Englewood Cliffs, N.J. : Prentice-Hall, c. 1992.
621 pp. Both authors are senior figures in industrial
organization economics and this is yet another of the wonderful
synthesizing books of the early 1990's.
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Rasmusen. Last updated: March 23, 2002.