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Reward Structures in a Planned Economy: The Problem of Incentives and Efficient Allocation of Resources

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  • Mo-Yin S. Tam

Abstract

This paper considers a reward mechanism for inducing the choice of a socially optimal level of output by a socialist price-setting manager. Under this mechanism the planner is assumed to have no information other than the observed output and price level. It thus has informational advantages over other schemes thus far discussed in the literature. The other schemes require the additional knowledge of demand elasticities of all the products produced in the economy. Besides this informational advantage the reward structure suggested here also eliminates other basic weaknesses of those schemes suggested previously.

Suggested Citation

  • Mo-Yin S. Tam, 1981. "Reward Structures in a Planned Economy: The Problem of Incentives and Efficient Allocation of Resources," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 96(1), pages 111-128.
    • Handle: RePEc:oup:qjecon:v:96:y:1981:i:1:p:111-128.
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    Cited by:

    1. Benard, Jean, 1987. "Socialist incentive schemes and price planning," CEPREMAP Working Papers (Couverture Orange) 8735, CEPREMAP.
    2. Domenico Scalera & Alberto Zazzaro, 2002. "Subsidies, Negotiated Planning and Public Enterprise in the Italian Mezzogiorno," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 3, November.
    3. Joseph Persky, 1991. "Retrospectives: Lange and von Mises, Large-Scale Enterprises, and the Economic Case for Socialism," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 229-236, Fall.
    4. Jacques LAWARREE, 1990. "Incitations Manageriales Dans Les Entreprises Publiques," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 61(4), pages 469-488, October.
    5. Kim, Jae-Cheol & Lee, Sang-Ho, 1995. "An optimal regulation in an intertemporal oligopoly market: The Generalized Incremental Surplus Subsidy (GISS) scheme," Information Economics and Policy, Elsevier, vol. 7(3), pages 225-249, September.

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