Incentives for Boundedly Rational Agents
This paper develops a theoretical framework for analyzing incentive schemes under bounded rationality. It starts from a standard principal-agent model and then superimposes an assumption of boundedly rational behavior on the part of the agent. Boundedly rational behavior is modeled as an explicit optimization procedure, which combines gradient dynamics with imitation and experimentation. The results predict the underprovision of optimal incentives and deviation from a standard sufficient statistics result from the agency literature. It also allows us to address the question of creating the optimal incentives in a multicultural environment.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 3 (2003)
Issue (Month): 1 (June)
|Contact details of provider:|| Web page: http://www.degruyter.com|
|Order Information:||Web: http://www.degruyter.com/view/j/bejte|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Spence, Michael & Zeckhauser, Richard, 1971. "Insurance, Information, and Individual Action," American Economic Review, American Economic Association, vol. 61(2), pages 380-87, May.
- Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
- Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-39, May.
- Marianne Bertrand & Sendhil Mullainathan, 2000.
"Do CEOs Set Their Own Pay? The Ones Without Principals Do,"
810, Princeton University, Department of Economics, Industrial Relations Section..
- Marianne Bertrand & Sendhil Mullainathan, 2000. "Do CEOs Set Their Own Pay? The Ones Without Principals Do," NBER Working Papers 7604, National Bureau of Economic Research, Inc.
- Jensen, M.C. & Murphy, K.J., 1988.
"Performance Pay And Top Management Incentives,"
88-04, Rochester, Business - Managerial Economics Research Center.
When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:topics.3:y:2003:i:1:n:2. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.