IDEAS home Printed from https://ideas.repec.org/a/rje/bellje/v7y1976ispringp251-257.html
   My bibliography  Save this article

The New Soviet Incentive Model

Author

Listed:
  • Martin L. Weitzman

Abstract

Suppose y is a "performance indicator" for an enterprise. As examples, y might stand for output, profits, cost savings, or factor productivity. With standard piecework reward systems the manager of an enterprise will try to convince his superiors that y is likely to be small, thereby entitling him to a lower target which is easier to fulfill. A new reform in the Soviet economy is aimed at stimulating more ambitious plans by making the bonus size depend on the plan target as well as the degree to which it has been fulfilled. This novel incentive scheme is modelled in the present paper and its basic properties are analyzed. Some applications and extensions are proposed.

Suggested Citation

  • Martin L. Weitzman, 1976. "The New Soviet Incentive Model," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 251-257, Spring.
  • Handle: RePEc:rje:bellje:v:7:y:1976:i:spring:p:251-257
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0361-915X%28197621%297%3A1%3C251%3ATNSIM%3E2.0.CO%3B2-%23&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

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

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kato, Takao & Long, Cheryl, 2006. "Executive Compensation, Firm Performance, and Corporate Governance in China: Evidence from Firms Listed in the Shanghai and Shenzhen Stock Exchanges," Economic Development and Cultural Change, University of Chicago Press, vol. 54(4), pages 945-983, July.
    2. Arleta Rasmußen, 2015. "Reporting behavior: a literature review of experimental studies," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 23(2), pages 283-311, June.
    3. Melumad, Nahum D. & Reichelstein, Stefan, 1989. "Value of communication in agencies," Journal of Economic Theory, Elsevier, vol. 47(2), pages 334-368, April.
    4. Kato, Takao & Long, Cheryl, 2006. "CEO Turnover, Firm Performance and Enterprise Reform in China: Evidence from New Micro Data," IZA Discussion Papers 1914, Institute for the Study of Labor (IZA).
    5. Shannon W. Anderson & Henri C. Dekker & Karen L. Sedatole, 2010. "An Empirical Examination of Goals and Performance-to-Goal Following the Introduction of an Incentive Bonus Plan with Participative Goal Setting," Management Science, INFORMS, vol. 56(1), pages 90-109, January.
    6. Nicol'as Hern'andez Santib'a~nez & Dylan Possamai & Chao Zhou, 2017. "Bank monitoring incentives under moral hazard and adverse selection," Papers 1701.05864, arXiv.org, revised Feb 2018.
    7. Itami, Hiroyuki, 1982. "Analysis of the Optimal Linear Goal-based Incentive System," Hitotsubashi Journal of commerce and management, Hitotsubashi University, vol. 17(1), pages 42-65, January.
    8. Arnold, Markus C. & Gillenkirch, Robert M., 2015. "Using negotiated budgets for planning and performance evaluation: An experimental study," Accounting, Organizations and Society, Elsevier, vol. 43(C), pages 1-16.
    9. Committee, Nobel Prize, 2014. "Market power and regulation (scientific background)," Nobel Prize in Economics documents 2014-2, Nobel Prize Committee.
    10. Kato, Takao & Long, Cheryl, 2006. "CEO turnover, firm performance, and enterprise reform in China: Evidence from micro data," Journal of Comparative Economics, Elsevier, vol. 34(4), pages 796-817, December.
    11. Helmuth Cremer & Jacques Crémer, 1993. "L'apport des théories économiques récentes à la planification indicative," Revue Économique, Programme National Persée, vol. 44(1), pages 57-74.
    12. Mookherjee, D. & Reichelstein, S., 1996. "Budgeting and Hierarchical Control," Papers 71, Boston University - Industry Studies Programme.
    13. Kato, Takao & Long, Cheryl, 2011. "Tournaments and managerial incentives in China's listed firms: New evidence," China Economic Review, Elsevier, vol. 22(1), pages 1-10, March.
    14. Yves Simon & Henri Tezenas du Montcel, 1977. "Théorie de la firme et réforme de l'entreprise," Revue Économique, Programme National Persée, vol. 28(3), pages 321-351.
    15. Martini, Jan Thomas & Niemann, Rainer & Simons, Dirk, 2007. "Transfer pricing or formula apportionment? Tax-induced distortions of multinationals' investment and production decisions," arqus Discussion Papers in Quantitative Tax Research 27, arqus - Arbeitskreis Quantitative Steuerlehre.
    16. Edward P. Lazear, 1986. "Incentive Contracts," NBER Working Papers 1917, National Bureau of Economic Research, Inc.
    17. Martin Gaynor, 1989. "The presence of moral hazard in budget breaking," Public Choice, Springer, vol. 61(3), pages 261-267, June.
    18. Gjesdal, Froystein, 1988. " Piecewise Linear Incentive Schemes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(3), pages 305-328.
    19. Nicolás Hernández Santibáñez & Dylan Possamaï & Chao Zhou, 2017. "Bank monitoring incentives under moral hazard and adverse selection," Working Papers hal-01435460, HAL.
    20. Markus Eckey & Utz Schäffer, 2006. "Kontrolle von Mehrheitsbeteiligungen in börsennotierten Management-Holdings," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 17(3), pages 251-280, November.
    21. LAFFONT, Jean-Jacques, 1980. "Théorie des incitations : un exemple introductif," Institut des Mathématiques Economiques – Document de travail de l’I.M.E. (1974-1993) 40, Institut des Mathématiques Economiques. LATEC, Laboratoire d'Analyse et des Techniques EConomiques, CNRS, Université de Bourgogne.
    22. Jan Thomas Martini & Rainer Niemann & Dirk Simons, 2007. "Transfer Pricing or Formula Apportionment? Tax-Induced Distortions of Multinationals’ Investment and Production Decisions," CESifo Working Paper Series 2020, CESifo Group Munich.
    23. Jones, Derek C. & Kato, Takao, 1996. "The determinants of chief executive compensation in transitional economies: Evidence from Bulgaria," Labour Economics, Elsevier, vol. 3(3), pages 319-336, October.
    24. Christian Lohmann & Sandro Lombardo, 2014. "Resource allocation within a budgeting game: truthful reporting as the dominant strategy under collusion," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 25(1), pages 33-54, September.

    More about this item

    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:rje:bellje:v:7:y:1976:i:spring:p:251-257. 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: (). General contact details of provider: http://www.rje.org .

    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.

    We have no references for this item. You can help adding them by using 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.