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

Planning under Incomplete Information and the Ratchet Effect

Listed author(s):
  • Xavier Freixas
  • Roger Guesnerie
  • Jean Tirole

Central planning of production is usually performed under asymmetric information which leads to use of an incentive scheme. As the planner revises the scheme over time to take into account information provided by the firm's performance, this induces firms to underproduce to avoid more demanding schedules in the future—the ratchet effect. This paper explores this phenomenon under the realistic assumption that the planner cannot commit himself to a revision procedure. We show that the ratchet effect exists, in the sense that the planner may choose a scheme which is suboptimal from a static viewpoint in order to induce revelation, with the marginal price of output exceeding its optimal static value.

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://hdl.handle.net/10.2307/2297615
Download Restriction: Access to full text is restricted to subscribers.

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 Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 52 (1985)
Issue (Month): 2 ()
Pages: 173-191

as
in new window

Handle: RePEc:oup:restud:v:52:y:1985:i:2:p:173-191.
Contact details of provider:

No references listed on IDEAS
You can help add them by filling out this form.

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:oup:restud:v:52:y:1985:i:2:p:173-191.. 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: (Oxford University Press)

or (Christopher F. Baum)

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.