Publications and papers |
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Authors: | Michael Casson |
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Institution: | Delaware State University , Dover , USA |
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Abstract: | America’s elementary and secondary educational system is faced with an inefficiency stemming from a basic problem associated with unobservability: moral hazard. In this case, the teacher (agent) has an incentive to exert less effort (given cost associated with more work) if the school district (principal) cannot distinguish between low student performance due to a lack of teacher effort and low student performance due low student quality (random variable). This research develops an optimal incentive scheme that guarantees the teacher a fixed payment, plus a variable payment that would be a function of teacher ‘action’ variables thereby reducing moral hazard. |
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Keywords: | Principal–Agent Moral hazard Remuneration scheme Teacher effort I20 I21 I22 I28 |
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