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High-powered incentives and communication failure

Listed author(s):
  • Mishra, Ajit
  • Sarangi, Sudipta

This paper uses a donor–provider–agent framework to study the role of provider incentives for the delivery of developmental goods like aid, credit, or technology transfer to the poor. It considers a situation where credible communication by the provider is the key to successful delivery. The study focuses on the interplay between incentives and communications and shows that the use of high-powered incentives can lead to breakdown of communication between providers and agents, leading to undesirable outcomes. However, in many situations motivated providers or state-contingent contracts can be used to achieve the second best outcome.

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File URL: http://www.sciencedirect.com/science/article/pii/S0167268116301664
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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 131 (2016)
Issue (Month): PA ()
Pages: 51-60

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Handle: RePEc:eee:jeborg:v:131:y:2016:i:pa:p:51-60
DOI: 10.1016/j.jebo.2016.08.007
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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