High-powered incentives and communication failure

Ajit Mishra, S. Sarangi

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Abstract

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.
Original languageEnglish
Pages (from-to)51-60
Number of pages10
JournalJournal of Economic Behavior and Organization
Volume131
Issue numberPart A
Early online date22 Aug 2016
DOIs
Publication statusPublished - 1 Nov 2016

Keywords

  • incentives
  • communication
  • motivated provider

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