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Incentivizing research with (un)conditional teaching duties: Punishment or rent extraction?

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  • Schmitz, Patrick W.

Abstract

A principal wants an agent to exert unobservable research effort. Ruling out negative payments implies that (i) the principal cannot punish bad outcomes and (ii) she cannot extract rents. We disentangle these two effects by allowing the principal to place verifiable teaching duties on the agent. In the first scenario, the principal can punish the agent with completely unproductive teaching duties conditional on bad research outcomes. In the second scenario, the agent is forced to teach regardless of research outcomes, though his teaching disutility is larger than the principal’s benefit. Each of the two scenarios may involve higher research efforts.

Suggested Citation

  • Schmitz, Patrick W., 2023. "Incentivizing research with (un)conditional teaching duties: Punishment or rent extraction?," Economics Letters, Elsevier, vol. 224(C).
    • Handle: RePEc:eee:ecolet:v:224:y:2023:i:c:s016517652300037x
    DOI: 10.1016/j.econlet.2023.111012
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    More about this item

    Keywords

    Moral hazard; Limited liability; Hidden action; Incentive contracts; Job design;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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