This paper uses a donor–provider–agent framework to study the role of provider incentives for the delivery of developmental goods like aid, credit, or technology transfer to the poor. It considers a situation where credible communication by the provider is the key to successful delivery. The study focuses on the interplay between incentives and communications and shows that the use of high-powered incentives can lead to breakdown of communication between providers and agents, leading to undesirable outcomes. However, in many situations motivated providers or state-contingent contracts can be used to achieve the second best outcome.
CITATION STYLE
Mishra, A., & Sarangi, S. (2016). High-powered incentives and communication failure. Journal of Economic Behavior and Organization, 131, 51–60. https://doi.org/10.1016/j.jebo.2016.08.007
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