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Incentives in Organizations

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  • Robert Gibbons

Abstract

In this paper, the author summarizes four new strands in agency theory that help him think about incentives in real organizations. As a point of departure, The author begins with a quick sketch of the classic agency model. He then discusses static models of objective performance measurement that sharpen Kerr's argument; repeated-game models of subjective performance assessments; incentives for skill development rather than simply for effort; and incentive contracts between versus within organizations. The author concludes by suggesting two avenues for further progress in agency theory: better integration with organizational economics, as launched by Coase (1937) and reinvigorated by Williamson (1975, 1985), and cross-pollination with other fields that study organizations, including industrial relations, organizational sociology, and social psychology.

Suggested Citation

  • Robert Gibbons, 1998. "Incentives in Organizations," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 115-132, Fall.
  • Handle: RePEc:aea:jecper:v:12:y:1998:i:4:p:115-32
    Note: DOI: 10.1257/jep.12.4.115
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.12.4.115
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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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