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Incentives Between Firms (and Within)

  • Robert Gibbons

    ()

    (Sloan School of Management and Department of Economics, Massachusetts Institute of Technology, 50 Memorial Drive, Cambridge, Massachusetts 02142)

This paper reviews the significant progress in Üagency theoryÝ (i.e., the economic theory of incentives) during the 1990s, with an eye toward applications to supply transactions. I emphasize six recent models, in three pairs: (1) new foundations for the theory of incentive contracts, (2) new directions in incentive theory, and (3) new applications to supply transactions. By reviewing these six models, I hope to establish three things. First, the theory of incentive contracts needed and received new foundations. Second, new directions in incentive theory teach us that incentive contracts are not the only source of incentives. Finally (and especially relevant to supply transactions), the integration decision is an instrument in the incentive problem.

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File URL: http://dx.doi.org/10.1287/mnsc.1040.0229
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 51 (2005)
Issue (Month): 1 (January)
Pages: 2-17

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Handle: RePEc:inm:ormnsc:v:51:y:2005:i:1:p:2-17
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  2. Kreps,David M. & Wallis,Kenneth F. (ed.), 1997. "Advances in Economics and Econometrics: Theory and Applications," Cambridge Books, Cambridge University Press, number 9780521589833, September.
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  4. Canice Prendergast, 1993. "The Role of Promotion in Inducing Specific Human Capital Acquisition," The Quarterly Journal of Economics, Oxford University Press, vol. 108(2), pages 523-534.
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  6. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
  7. Robert Gibbons & Kevin J. Murphy, 1991. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," NBER Working Papers 3792, National Bureau of Economic Research, Inc.
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  10. George Baker & Robert Gibbons & Kevin J. Murphy, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1125-1156.
  11. W. Bentley MacLeod & James M. Malcomson, 1986. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Working Papers 585, Queen's University, Department of Economics.
  12. Holmstrom, Bengt & Tirole, Jean, 1991. "Transfer Pricing and Organizational Form," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(2), pages 201-28, Fall.
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  16. Judith A. Chevalier & Glenn D. Ellison, 1995. "Risk Taking by Mutual Funds as a Response to Incentives," NBER Working Papers 5234, National Bureau of Economic Research, Inc.
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  18. Brown, Keith C & Harlow, W V & Starks, Laura T, 1996. " Of Tournaments and Temptations: An Analysis of Managerial Incentives in the Mutual Fund Industry," Journal of Finance, American Finance Association, vol. 51(1), pages 85-110, March.
  19. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
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  24. Healy, Paul M., 1985. "The effect of bonus schemes on accounting decisions," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 85-107, April.
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  30. repec:sae:ilrrev:v:43:y:1990:i:3:p:89-106 is not listed on IDEAS
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