Push or pull? Performance‐pay, incentives, and information | Zendy

Rietzke David | Zendy; Chen Yu | Zendy

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Push or pull? Performance‐pay, incentives, and information

Author(s) -

Rietzke David,

Chen Yu

Publication year - 2020

Publication title -

the rand journal of economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 3.687

H-Index - 108

eISSN - 1756-2171

pISSN - 0741-6261

DOI - 10.1111/1756-2171.12314

Subject(s) - unobservable , incentive , principal (computer security) , microeconomics , principal–agent problem , economics , business , computer science , econometrics , finance , computer security , corporate governance

We study a principal‐agent model wherein the agent is better informed of the prospects of the project, and the project requires both an observable and unobservable input. We characterize the optimal contracts, and explore the trade‐offs between high‐ and low‐powered incentive schemes. We discuss the implications for push and pull programs used to encourage Research and Development (R&D) activity, but our results are relevant in other contexts.

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