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Sales Contracts and Production Uncertainty*
Author(s) -
DRAGO ROBERT
Publication year - 1992
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1992.tb01784.x
Subject(s) - production (economics) , incentive , productivity , work (physics) , industrial organization , microeconomics , business , economics , engineering , macroeconomics , mechanical engineering
The paper examines production under common uncertainty where sales contracts specify penalties for under‐ or over‐production. We locate a trade‐off between high productivity and the incurrence of penalties, and identify work incentives appropriate for different cases.