The optimal sequencing of carrots
When aid organizations contract with local agents aid funds have the potential to be diverted to purposes other than the intended project. A multi-stage game is presented where the benefit from the project is cumulative, with the application of funds in each stage increasing both the agent's and the organization's benefit from the project. As the agent's utility of diversion increases, the allocation in each stage decreases and the project takes more stages to complete. When contracting with agents with high utilities of diversion the optimal contract involves bloated projects and a side payment to the agent upon completion. If the organization's commitment to the contract is not credible both the agent's and the organization's benefit is reduced.
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.
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.:
- David Dollar & Craig Burnside, 2000.
"Aid, Policies, and Growth,"
American Economic Review,
American Economic Association, vol. 90(4), pages 847-868, September.
- Anat R. Admati & Motty Perry, 1991. "Joint Projects without Commitment," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 259-276.
- Albert Marcet & Ramon Marimon, 1991.
"Communication, commitment and growth,"
Economics Working Papers
1, Department of Economics and Business, Universitat Pompeu Fabra.
- Albert Marcet & Ramon Marimon, 1992. "Communication, commitment, and growth," Discussion Paper / Institute for Empirical Macroeconomics 74, Federal Reserve Bank of Minneapolis.
- Leslie M. Marx & Steven A. Matthews, 2000. "Dynamic Voluntary Contribution to a Public Project," Review of Economic Studies, Oxford University Press, vol. 67(2), pages 327-358.
- Jeremy Bulow & Kenneth Rogoff, 2005.
"Grants versus Loans for Development Banks,"
American Economic Review,
American Economic Association, vol. 95(2), pages 393-397, May.
- David A. Malueg, 1988. "Repeated Insurance Contracts with Differential Learning," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 177-181.
- Atkeson, Andrew, 1991.
"International Lending with Moral Hazard and Risk of Repudiation,"
Econometric Society, vol. 59(4), pages 1069-89, July.
- Andrew Atkeson, 2010. "International lending with moral hazard and risk of repudiation," Levine's Working Paper Archive 200, David K. Levine.
When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:93:y:2010:i:1:p:1-6. 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: (Zhang, Lei)
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.