IDEAS home Printed from https://ideas.repec.org/a/mhr/jinste/urnsici0932-4569(201212)1684_687diumpm_2.0.tx_2-5.html
   My bibliography  Save this article

Designing Incentives under Multidimensional Performance Measures

Author

Listed:
  • Surajeet Chakravarty
  • Miltiadis Makris

Abstract

We attempt to shed some light on the problem of providing incentives to service providers such as teachers and doctors. Often, outcomes of such services are not verifiable, and this has been cited as a reason for lack of incentive provision. We derive the contract offered by a principal if, in addition to moral hazard, the output of the agent may not be verified. We show that verified high attainment may not be rewarded. In this case, the bonus is increasing in the ability to verify output. We also show that an increase in potential nonverifiability may lead to efficiency gains and be beneficial for the principal.

Suggested Citation

  • Surajeet Chakravarty & Miltiadis Makris, 2012. "Designing Incentives under Multidimensional Performance Measures," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(4), pages 687-711, December.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201212)168:4_687:diumpm_2.0.tx_2-5
    as

    Download full text from publisher

    File URL: http://www.ingentaconnect.com/content/mohr/jite/2012/00000168/00000004/art00007
    Download Restriction: Fulltext access is included for subscribers to the printed version.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Luca Anderlini & Leonardo Felli, 1994. "Incomplete Written Contracts: Undescribable States of Nature," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1085-1124.
    2. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
    3. Dixit, Avinash, 1997. "Power of Incentives in Private versus Public Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 378-382, May.
    4. Thomas S. Dee & Benjamin J. Keys, 2004. "Does merit pay reward good teachers? Evidence from a randomized experiment," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(3), pages 471-488.
    5. Bull, Jesse & Watson, Joel, 2004. "Evidence disclosure and verifiability," Journal of Economic Theory, Elsevier, vol. 118(1), pages 1-31, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mhr:jinste:urn:sici:0932-4569(201212)168:4_687:diumpm_2.0.tx_2-5. 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: (Thomas Wolpert). General contact details of provider: https://www.mohr.de/jite .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.