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Incentives for Motivated Experts in a Partnership

Author

Listed:
  • Ting Liu

    (Stony Brook University)

  • Ching-To Albert Ma

    (Boston University)

  • Henry Y. Mak

    (Indiana University-Purdue University Indianapolis)

Abstract

A Principal would like low-benefit projects to be serviced by a low-cost-low-productivity expert and high- benefit projects, by a high-cost-high-productivity expert. Experts derive intrinsic or extrinsic motivational benefits from providing services, but must earn minimum profits. The Principal lacks information about project benefits and experts' motivations, which are both known to experts. Experts form a Partnership, which sets up a gatekeeping-referral protocol and a corresponding sharing rule. We show that the Principal can implement the first best by a single contract with the Partnership. The contract is quasi-linear, consisting of a lump sum, and a partial reimbursement of experts' incurred costs.

Suggested Citation

  • Ting Liu & Ching-To Albert Ma & Henry Y. Mak, 2015. "Incentives for Motivated Experts in a Partnership," Boston University - Department of Economics - Working Papers Series wp2015-006, Boston University - Department of Economics.
    • Handle: RePEc:bos:wpaper:wp2015-006
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    File URL: http://people.bu.edu/ma/Partnership_June_2015.pdf
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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