{"title":"Incentives and performance under two-dimensional moral hazard","authors":"","doi":"10.1016/j.jebo.2024.06.037","DOIUrl":null,"url":null,"abstract":"<div><p>This paper explores how an agent’s incentives map into her performance. We let the agent choose how much effort to invest and which project to implement. We show that the relationship between an agent’s incentives to perform and her expected performance could be negative and we characterize alternative conditions for a negative relationship. This also holds true when the principal instead of the agent makes the project choice. We thereby show that the you-get-what-you-pay-for principle is not robust and offer a non-behavioral explanation for the failure of incentives. The results have implications for regulation and ownership structures.</p></div>","PeriodicalId":48409,"journal":{"name":"Journal of Economic Behavior & Organization","volume":null,"pages":null},"PeriodicalIF":2.3000,"publicationDate":"2024-07-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0167268124002555/pdfft?md5=9a78c9593eefd09f19cca3fd482f62f8&pid=1-s2.0-S0167268124002555-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Economic Behavior & Organization","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0167268124002555","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
This paper explores how an agent’s incentives map into her performance. We let the agent choose how much effort to invest and which project to implement. We show that the relationship between an agent’s incentives to perform and her expected performance could be negative and we characterize alternative conditions for a negative relationship. This also holds true when the principal instead of the agent makes the project choice. We thereby show that the you-get-what-you-pay-for principle is not robust and offer a non-behavioral explanation for the failure of incentives. The results have implications for regulation and ownership structures.
期刊介绍:
The Journal of Economic Behavior and Organization is devoted to theoretical and empirical research concerning economic decision, organization and behavior and to economic change in all its aspects. Its specific purposes are to foster an improved understanding of how human cognitive, computational and informational characteristics influence the working of economic organizations and market economies and how an economy structural features lead to various types of micro and macro behavior, to changing patterns of development and to institutional evolution. Research with these purposes that explore the interrelations of economics with other disciplines such as biology, psychology, law, anthropology, sociology and mathematics is particularly welcome.