An Introduction to the Theory of Incentives;Concept, Methodology, and the Formation process of its Basic Approaches

Document Type : a

Authors

1 Associat Professor, Ferdowsi University of Mashhad

2 PhD Student in Economics, International Campus of Ferdowsi University of Mashhad (responsible

Abstract


 
During the 1950s and 1960s, the theoretical trend in economics, particularly neoclassical economics, was rested on certain assumptions including rational behavior maximization, methodological individualism, and complete information. Some economists believed that such inflexible assumptions caused the failures of neoclassical economics; hence they established a new method for studying and analyzing the economic relations. Instead of using general equilibrium models, their basic idea is centered on partial analyses to clarify the complexities of strategic interactions among economic agents possessing private information. In this approach, a firm is considered as an organizing structure rather than a production function or a technical foundation. In this structure both the formation of a contract among economic agents due to the lack of symmetric information and the ways that lead the agents to make appropriate decisions are analyzed using the incentive theory. This study is mainly aimed at introducing the incentive theory, explicating its operational method, as well as implementing it in empirical contexts.
 

Keywords

References

اخباری محمد (1386). «طراحی مکانیسم؛ پاسخی به پرسش‌های بسیار»، نشریة روند اقتصادی، ش 36.
 
معینی، شهرام و محسن رنانی (1389). «مسئلة داوری در حقوق مالکیت؛ صورت‌بندی، طراحی مکانیسم و استخراج تابع بهترین عکس‌العمل در چهارچوب نظریة بازی»، فصل‌نامة اقتصاد تطبیقی، پژوهشگاه علوم انسانی و مطالعات فرهنگی، س 1، ش 1.
 
واریان، هال (1378). تحلیل اقتصاد خرد، ترجمة رضا حسینی، تهران: نشر نی.
 
هادوی‌نیا، علی‌اصغر (1382). انسان اقتصادی از دیدگاه اسلام، پژوهشگاه فرهنگ و اندیشه.
 
Abowd, John (1990). “Does Performance-Based Managerial Compensation Affect Corporate Performance?”, Indusrial and Labor Relations review, No.43.
 
Arrow, K. (1951). Social Choice and Individual Values, T. Wiley, New York.
 
Cyert, Richard and James March (1963). A Behavioral Theory of the Firm, Englewood Cliffs, NJ: Prentice-Hall, Oxford: Blackwell Publishers.
 
Gibbard, A. (1973). “Manipulation of Voting Schemes: A General Result”, Econometrica, No. 41.
 
Gibbons, Robert and Kevin J. Murphy (1992). “Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence”, Journal of Political Economy, No. 100.
 
Gibbons, Robert and Michael Powell (2008a). Influence-Cost Theories of the Firm, Unpublished manuscript, MIT.
 
Gibbons, Robert and Michael Powell (2008b). conomic Theories of Internal Organization: Pricing, Politics, and Path-Dependence, Unpublished manuscript, MIT.
 
Gibbons, Robert, (2005). “Incentives between Firms (and Within)”, Management Science, No. 51.
 
Gintis, H and A. Mandel (2012). The Dynamics of Walrasian General Equilibrium: Theory and Application, Sorbonne University Paris.
 
Grossman, S. and O. Hart (1983). “An Analysis of the Principal-Agent Problem”, Econometrica.
 
Holmstrom, Bengt (1982). “Managerial Incentive Problems-A Dynamic Perspective”, In Essays in Economics and Management in Honor of Lars Wahlbeck, Helsinki: Swedish School of Economics, Republished in Review of Economic Studies 66 (1999)
 
Holmstrom, Bengt and Paul Milgrom (1987). “The Firm as an Incentive System”, American Economic Review, No: 84.
 
Hume, D. A. (1740). Treatise of Human Nature, Oxford University Press, OxFord.
 
Hurwicz, L. (1960). “Optimality and Informaational E±ciency in Resourc Allocation Processes”, in Mathematical Methods in the Social Sciences, Arrow, K., S. Karlin and P. Suppes ed., Stanford University Press, Stan- ford.
 
Kahn, Charles and Peter Sherer (1990). “Coningent Pay and Managerial Performance?”, Indusrial and Labor Relations review, No. 43.
 
Laffont, J. J. and D. Martimort (2002). The Theory of Incentives: The Principal-Agent Model, Princeton University Press.
 
Lazear, Edward (1979). “Why is there mandatory retirement?”, Journal of Political Economy, No. 59.
 
Mas-Colell, A., M. D. Whinston, and J. Green (1995). Microeconomic, Oxford University Press.
 
Maskin, E. (1999). “Nash Equilibrium and Welfare Optimality”, Reveiw of Economic Studies, No. 23.
 
Mirrlees, J (1974). “Notes on Welfare Economics, Information, and Uncertainty”, In M. Balch, D. McFadden, and S.Wu (eds.), Essays on Economic Behavior under Uncertainty, Amsterdam: North-Holland.
 
Murphy, Kevin J. (1985). “Corporate Performance and Managerial Remuneration: An Empirical Analysis”, Journal of Accounting and Economic, No.7.
 
Myerson, R. (1981). “Optimal Auction Design”, Mathematics of Operations Research.
 
Smith, A. (1776). The Wealth of Nations, The Modern Library, New York.
 
Wicksell, K. (1986). “Finanz theoretische Untersuchungen und das Steuerwesen Schweden's”, Jena, Germany, No. 43.
Journal of Iranian Economic Issues
Volume 2, Issue 1
September 2015
Pages 72-97

Files

History

  • Receive Date: 08 May 2015
  • Revise Date: 01 June 2015
  • Accept Date: 16 July 2015

Share

How to cite

Statistics