IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Paying for performance: Uncertainty, asymmetric information and the payment model

  • Hooper, Louise
Registered author(s):

    Privatisation has led to a growing interest in more complex contractual forms designed to give public transport operators the incentives for effort that maximise value for money. Contract theory provides a rich research basis for selecting an appropriate contractual form, with an emphasis on the effects of uncertainty and asymmetric information. To date, however, there have been few applications of contract theory in the field of transport. This paper identifies the key empirical results from the multi-disciplinary literature to help transport researchers and practitioners place contractual decision-making in the broader theoretical context, suggesting aspects of transport contracting that merit future research.

    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.

    File URL: http://www.sciencedirect.com/science/article/pii/S0739-8859(08)00025-5
    Download Restriction: Full text for ScienceDirect subscribers only

    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.

    Article provided by Elsevier in its journal Research in Transportation Economics.

    Volume (Year): 22 (2008)
    Issue (Month): 1 (January)
    Pages: 157-163

    as
    in new window

    Handle: RePEc:eee:retrec:v:22:y:2008:i:1:p:157-163
    Contact details of provider: Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/620614/description#description

    Order Information: Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
    Web: https://shop.elsevier.com/order?id=714194&ref=714194_01_ooc_2&version=01

    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.:

    as in new window
    1. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    2. Rajesh K. Aggarwal & Andrew A. Samwick, 1999. "The Other Side of the Trade-off: The Impact of Risk on Executive Compensation," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 65-105, February.
    3. Weiss, Andrew, 1983. "A Sorting-cum-Learning Model of Education," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 420-42, June.
    4. Bandiera, Oriana, 2001. "On the Structure of Tenancy Contracts: Theory and Evidence from 19th Century Rural Sicily," CEPR Discussion Papers 3032, C.E.P.R. Discussion Papers.
    5. Brian J. Hall & Jeffrey B. Liebman, 1997. "Are CEOs Really Paid Like Bureaucrats?," NBER Working Papers 6213, National Bureau of Economic Research, Inc.
    6. M. Dewatripont & E. Maskin, 1995. "Credit and Efficiency in Centralized and Decentralized Economies," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 541-555.
    7. Chiappori, Pierre-Andre & Salanie, Bernard, 1997. "Empirical contract theory: The case of insurance data," European Economic Review, Elsevier, vol. 41(3-5), pages 943-950, April.
    8. Abhijit V. Banerjee & Paul J. Gertler & Maitreesh Ghatak, 2002. "Empowerment and Efficiency: Tenancy Reform in West Bengal," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 239-280, April.
    9. Georg Noldeke & Eric van Damme, 1990. "Signalling in a Dynamic Labour Market," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 1-23.
    10. Bengt Holmstrom & Paul R. Milgrom, 1985. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Cowles Foundation Discussion Papers 742, Cowles Foundation for Research in Economics, Yale University.
    11. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
    12. Brugiavini, Agar, 1993. "Uncertainty resolution and the timing of annuity purchases," Journal of Public Economics, Elsevier, vol. 50(1), pages 31-62, January.
    13. Maskin, Eric & Tirole, Jean, 1992. "The Principal-Agent Relationship with an Informed Principal, II: Common Values," Econometrica, Econometric Society, vol. 60(1), pages 1-42, January.
    14. Mark Armstrong, 1999. "Price Discrimination by a Many-Product Firm," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 151-168.
    15. Mathias Dewatripont & Eric Maskin, 1995. "Credit and efficiency in centralized and decentralized economies," ULB Institutional Repository 2013/9603, ULB -- Universite Libre de Bruxelles.
    16. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, June.
    17. Jewitt, Ian, 1988. "Justifying the First-Order Approach to Principal-Agent Problems," Econometrica, Econometric Society, vol. 56(5), pages 1177-90, September.
    18. George Baker, 2000. "The Use of Performance Measures in Incentive Contracting," American Economic Review, American Economic Association, vol. 90(2), pages 415-420, May.
    19. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, Oxford University Press, vol. 87(3), pages 355-374.
    20. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-41, June.
    21. Xavier Freixas & Roger Guesnerie & Jean Tirole, 1985. "Planning under Incomplete Information and the Ratchet Effect," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 173-191.
    22. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-61, October.
    23. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
    24. Joseph E. Stiglitz, 1973. "Incentives and Risk-Sharing in Sharecropping," Cowles Foundation Discussion Papers 353, Cowles Foundation for Research in Economics, Yale University.
    25. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
    26. Fudenberg, Drew & Tirole, Jean, 1990. "Moral Hazard and Renegotiation in Agency Contracts," Econometrica, Econometric Society, vol. 58(6), pages 1279-1319, November.
    27. Mathias Dewatripont, 1989. "Renegotiation and Information Revelation Over Time: The Case of Optimal Labor Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 104(3), pages 589-619.
    28. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    29. J. Kornai & E. Maskin & G. Roland., 2004. "Understanding the Soft Budget Constraint," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 12.
    30. Gérard Roland, 2000. "Transition and Economics: Politics, Markets, and Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182033, December.
    31. Ernst-Ludwig von Thadden, 1995. "Long-Term Contracts, Short-Term Investment and Monitoring," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 557-575.
    32. Bengt Holmstrom & John Roberts, 1998. "The Boundaries of the Firm Revisited," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 73-94, Fall.
    33. W. Bentley MacLeod & James M. Malcomson, 1986. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Working Papers 585, Queen's University, Department of Economics.
    34. Jonathan Levin, 2003. "Relational Incentive Contracts," American Economic Review, American Economic Association, vol. 93(3), pages 835-857, June.
    35. Hermalin, Benjamin E. & Katz, Michael L., 1990. "Moral Hazard and Verifiability: The Effects of Renegotiation in Agency," Department of Economics, Working Paper Series qt1678w3w9, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    36. Ackerberg, D.A. & Botticini, M., 1999. "Endogenous Matching and the Empirical Determinants of Contract Form," Papers 96, Boston University - Department of Economics.
    37. Slade, Margaret E, 1996. "Multitask Agency and Contract Choice: An Empirical Exploration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 465-86, May.
    38. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
    39. Mathias Dewatripont & Patrick Bolton, 2005. "Contract theory," ULB Institutional Repository 2013/9543, ULB -- Universite Libre de Bruxelles.
    40. Jensen, M.C. & Murphy, K.J., 1988. "Performance Pay And Top Management Incentives," Papers 88-04, Rochester, Business - Managerial Economics Research Center.
    41. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    42. Albert Ma, C.T. & Weiss, A.M., 1991. "A Signaling Theory of Unemployment," Papers 7, Boston University - Department of Economics.
    43. Holmstrom, Bengt R. & Tirole, Jean, 1989. "The theory of the firm," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 2, pages 61-133 Elsevier.
    44. Hensher, David A. & Stanley, John, 2003. "Performance-based quality contracts in bus service provision," Transportation Research Part A: Policy and Practice, Elsevier, vol. 37(6), pages 519-538, July.
    45. Kornai, J, 1979. "Resource-Constrained versus Demand-Constrained Systems," Econometrica, Econometric Society, vol. 47(4), pages 801-19, July.
    46. Hensher, David A. & Houghton, Erne, 2004. "Performance-based quality contracts for the bus sector: delivering social and commercial value for money," Transportation Research Part B: Methodological, Elsevier, vol. 38(2), pages 123-146, February.
    47. R. Preston McAfee & John McMillan & Michael D. Whinston, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 371-383.
    48. Lawrence W. Lan & Erwin T. J. Lin, 2006. "Performance Measurement for Railway Transport: Stochastic Distance Functions with Inefficiency and Ineffectiveness Effects," Journal of Transport Economics and Policy, University of Bath, vol. 40(3), pages 383-408, September.
    49. Kim, Son Ku, 1995. "Efficiency of an Information System in an Agency Model," Econometrica, Econometric Society, vol. 63(1), pages 89-102, January.
    50. Peltzman, Sam, 1975. "The Effects of Automobile Safety Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 677-725, August.
    51. Boyer, Marcel & Dionne, Georges, 1989. "An Empirical Analysis of Moral Hazard and Experience Rating," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 128-34, February.
    52. Laffont, Jean-Jacques & Tirole, Jean, 1988. "The Dynamics of Incentive Contracts," Econometrica, Econometric Society, vol. 56(5), pages 1153-75, September.
    53. repec:eme:rlepps:v:18:y:1999:i:1999:p:177-242 is not listed on IDEAS
    54. Benjamin M. Friedman & Mark Warshawsky, 1985. "The Cost of Annuities: Implications for Saving Behavior and Bequests," NBER Working Papers 1682, National Bureau of Economic Research, Inc.
    55. Hensher, David A. & Stopher, Peter & Bullock, Philip, 2003. "Service quality--developing a service quality index in the provision of commercial bus contracts," Transportation Research Part A: Policy and Practice, Elsevier, vol. 37(6), pages 499-517, July.
    56. Benjamin M. Friedman & Mark J. Warshawsky, 1990. "The Cost of Annuities: Implications for Saving Behavior and Bequests," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 135-154.
    57. Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563 Elsevier.
    58. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
    59. Scott E. Masten & Stéphane Saussier, 2000. "Econometrics of Contracts : an Assessment of Developments in the Empirical Literature on Contracting," Revue d'Économie Industrielle, Programme National Persée, vol. 92(1), pages 215-236.
    60. Ching-to Albert Ma, 1991. "Adverse Selection in Dynamic Moral Hazard," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 255-275.
    61. Shelanski, Howard A & Klein, Peter G, 1995. "Empirical Research in Transaction Cost Economics: A Review and Assessment," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(2), pages 335-61, October.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:retrec:v:22:y:2008:i:1:p:157-163. 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.