The Applicability of information-revealing incentive schemes in economic organizations |
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| Authors: | Peter Murrell Jeffrey Miller |
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| Institution: | Department of Economics, University of Maryland, College Park, Maryland 20742, USA;Department of Economics, University of Delaware, Newark, Delaware 19711 , USA |
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| Abstract: | The applicability in centrally planned economies of bonus functions that are designed to encourage subordinates to report information honestly is evaluated. If central planners seek Pareto-efficient outcomes, a unique bonus function and therefore a unique distribution of managerial incomes results. Hence, income distribution considerations must be embodied directly in the objective function. However, once such a change in the objective function is introduced, an optimal bonus function can no longer be found. |
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