collusion and discrimination in organizations abstract in a principal multi agent setting we investigate how optimal contracts should be modified under relative performance evaluation when agents collude agents may write side contracts which are not contingent on their effort choices but indirectly control them through side transfers we show that the optimal collusion proof contract is to introduce a discriminatory policy in the sense that the wage schemes offered to agents depend on their identities even if they are identical with respect to productive abilities such discriminatory wage schemes explain the organizational strategy of divide and conquer as an optimal response to collusion

the disaggregation of corporations selective intervention high powered incentives and molecular units a vast array of organizational innovations and changes are transforming us corporations large firms have dramatically downsized refocused and vertically disaggregated they increasingly obtain goods and services pursue complex development efforts and exploit horizontal synergies without the aid of formal hierarchy large firms are also internally disaggregating into smaller more autonomous units that are treated much like external subcontractors the authors argue that these organizational innovations share an important underlying commonalty economic activity is converging toward exchange involving either internal within firm or external between firm networks of small autonomous production or service units small units and small firms have become the basic building block the molecular units of these new forms further exchange among the small autonomous units is commonly a mix of both market like and hierarchical features the authors develop a theoretical explanation for these trends the

risk allocation and the costs and benefits of public private partnerships we study the agency costs of delegated public service provision focusing on the link between organizational forms and uncertainty at project implementation we consider a dynamic multitask moral hazard environment where the mapping between efiort and performance is ex ante uncertain but new information may come along during operations our analysis points out at the e ciency gains that bundling planning and implementation as under public private partnerships can bring in terms of better project design and lower operational costs bundling also results in increasingly better performance as uncertainty is reduced by growing experience in the sector bundling should instead be viewed with caution when the private sector seeks to radically innovate on public service provision or to introduce new services but lacks the knowledge and expertise to anticipate the impact of the innovative design procedure technology on the cost of operations the compounding of asymmetric information ex post plus moral hazard and renegotiation may generate diseconomies of scope in agency costs which for high operational risk can make unbundling optimal in this context the use of private flnance can help re establishing the beneflt of bundling only if lenders have su cient expertise to help assessing project risks

limited intertemporal commitment and job design abstract the paper shows that some of the guidelines for job design that emerge from a static analysis of the multitask agency problem can be overturned in a dynamic model with limited commitment static analyses have shown that it is optimal to assign workers sole responsibility for tasks and to allocate them tasks which are as homogeneous as possible with respect to the ease of measuring performance our dynamic analysis demonstrates that it can instead be optimal to make workers jointly responsible for tasks and to make their task portfolios as similar to one another but as internally diverse as possible

higher education career opportunities and intergenerational inequality the uk government has expressed a desire to increase social mobility with policies to help achieve this aim focused on reducing inequalities in educational attainment this paper draws together established and new information about the contribution that higher education can make to social mobility using a life course approach considering differences by family background in terms of university attendance and achievement as well as occupation and earnings following graduation we find substantial socio economic differences at each stage young people from poorer backgrounds are on average less likely to go to university than their richer peers even among the selected group who do go to university they are less likely to attend the highest status institutions less likely to graduate and less likely to achieve the highest degree classes these differences in degree outcomes contribute to the lower average earnings of graduates from poorer families but earnings differentials go well beyond those driven purely by degree attainment or institution attended the evidence strongly suggests that even after taking these factors into account graduates from affluent families are more likely to obtain a professional job and to see higher earnings growth in the labour market we discuss the implications of these findings for the prospects of higher education as a route to greater social mobility

rates of time preference and consumer valuations of automobile safety and fuel efficiency this article estimates hedonic price models for automobiles using a data set on almost 3 000 households from the u s department of energy residential transportation energy consumption survey the standard hedonic models are generalized to recognize the role of discounting of fuel efficiency and safety yielding an estimated rate of time preference ranging from 11 to 17 percent this range includes the prevailing rate of interest for car loans in 1988 and is consequently consistent with market rates purchasers exhibit an implicit value of life ranging from 2 6 to 3 7 million which is within the range found in the labor market as well as other market contexts the model also estimates a significant price effect for auto injury risks and fuel efficiency

economic and environmental gains of china s fossil energy subsidies reform a rebound effect case study with eimo model abstract energy consumption and efficiency emerged as the hottest topic in the context of china s sustainable development energy subsidies and rebound effect were closely related to this topic while few combinative studies on them with a focus on china this paper employed a co thinking approach focusing on how the energy subsidies reform could mitigate the rebound effect in china and how to achieve an economic and environmental gains that reduced pecuniary spending improved the distorted energy market and reduced energy consumption simultaneously firstly with price gap approach we calculated the total energy subsidies scale of china in 2007 which amounted to582 0 billion cny then we detected and identified rebound effect of china energy consumption with the features furthermore based on china 2007 monetary input output table and energy flow analysis we compiled a hybrid physical energy input and monetary output model eimo to simulate the mitigation effect of subsidies reform results showed that removing energy subsidies would decrease ultimate demand of different economy sectors and reduce the accumulatively physical consumption of coal oil natural gas and electricity by 17 74 13 47 3 64 and 15 82 million tce respectively finally we discussed relevant policy issues on china s energy subsidies reform in depth

collusion under asymmetric information when applied to groups the revelation principle postulates a bayesian nash behavior between agents their binding agreements are unenforceable or the principal can prevent them at no cost we analyze instead a mechanism design problem in which the agents can communicate between themselves and collude under asymmetric information we characterize the set of implementable collusion proof contracts both when the principal offers anonymous and nonanonymous contracts after having isolated the nexi and the stakes of collusion we proceed to a normative analysis perform some comparative statics discuss our concept of collusion proofness and provide some insights about transaction costs in side contracting

collusion and renegotiation in a principal supervisor agent relationship this paper describes a principal agent relationship with a supervisor who has information about the agent the agent and the supervisor have the possibility to collude and misinform the principal from the literature we know that there exists an optimal contract which excludes collusion in equilibrium the optimal contract however is ex post inefficient and creates scope for renegotiation if renegotiation is allowed then under some parameter constellations the optimal contract is a contract which necessarily induces collusion the paper thus shows that the principal s behavior toward ex post inefficiencies may determine whether collusion occurs in equilibrium

contracting theory and accounting abstract this paper reviews agency theory and its application to accounting issues i discuss the formulation of models of incentive problems caused by moral hazard and adverse selection problems i review theoretical research on the role of performance measures in compensation contracts and i compare how information is aggregated for compensation purposes versus valuation purposes i also review the literature on communication including models where the revelation principle does not apply so that nontruthful reporting and earnings management can take place the paper also discusses capital allocation within firms including transfer pricing and cost allocation problems

impact of government subsidies on household biogas use in rural china abstract in this paper we evaluate empirically the impact of biogas subsidies on household biogas energy use in rural china special attention was given to the problem of sample selection bias in assessing the impact of subsidies on biogas energy use because biogas subsidies often change the propensity for installing biogas digesters using data from a large scale household survey the results indicate that biogas subsidies did promote the construction of biogas digesters the results suggest that a 10 percentage point increase in subsidy cost ratio would lead to a 3 increase in digester installations we also found that biogas subsidies correlated negatively with average time of digester use a 10 percentage point increase in the subsidy cost ratio would result in a 4 3 reduction in the average working time of digesters these results suggest that the net effect of the current subsidy policy on rural household biogas use was near negligible indeed a 10 percentage point increase in the subsidy cost ratio resulted in a mere 1 15 increase in biogas use these findings indicate that biogas subsidies have possibly not been targeted effectively at households that would actually prefer to use biogas energy

policy implications of the purchasing intentions towards energy efficient appliances among china s urban residents do subsidies work incentive policies are always used to sway purchase retail stocking and production decisions toward energy efficient products by many countries or regions so the effectiveness of such subsidies has been of much concern to scholars this research focused on whether or not subsidy policies have guided people s intentions and behaviours we investigated 436 urban residents from 22 provinces in china covering the seven major geographic regions and made an empirical analysis of the factors influencing chinese urban residents purchasing intentions towards energy efficient appliances based on the structural equation model on theoretical aspect we developed the theory of planned behaviour our results show that the variable policy is insignificant which indicates that policy environment and media propaganda in china do not have significant effect on chinese residents willingness to pay for energy efficient appliances while the residents environmental awareness past purchasing experiences social relationships age and level of education all exert a significant influence on chinese residents purchasing intentions finally based on the above research results the corresponding policy suggestions which mainly focus on the time of subsidy the object of subsidy and the method of subsidy are offered for policy makers

collective organizations versus relative performance contracts inequality risk sharing and moral hazard abstract this paper studies collective economic organizations that share risk and mitigate moral hazard and compares them with relative performance contracts information constrained optimal distributions of organizations and contracts are shown to be functions of the underlying primitives in particular the distribution of pareto weights and hence degree of inequality internal inequality of a potential local group is a force for collective organization that is multi agent organizations exist in order to extract wealth from some but not necessarily all members the group organization is also shown to be information constrained pareto optimal at extremes of local wealth relative to an outsider but the group organization is susceptible to both agents simultaneously deviating colluding against the outsider and this distortion makes an individualistic relative performance contract an attractive alternative more generally organizations contracts and allocations are jointly determined these implications could be distinguished in cross sectional time series data journal of economic literature classification numbers d70 d82

information extraction and norms of mutual protection abstract we study a class of moral hazard economies in which a principal interacts with several agents in these economies first best allocations can be implemented via full information extraction when side trades between agents can be restricted when instead side trades cannot be restricted the ability of the principal to extract information from the agents is severely hampered in this context side trades take the form of informal contracts which can be directly interpreted as norms of mutual protection which are indeed quite common among extended family members as well as inside various social political and religious groups

should governments of oecd countries worry about graduate underemployment to assess potential public concerns this paper examines theory and evidence surrounding graduate educational underemployment overeducation in this era of mass higher education using a new validated index of graduate jobs we find that the prevalence of graduate underemployment across 21 countries is correlated with the aggregate supply demand imbalance but not with indicators of labour market flexibility underemployment s association with lower job satisfaction and pay is widespread yet in most countries there are external benefits social trust volunteering and political efficacy associated with higher education even for those who are underemployed taken together with existing studies we find that in this era of mass higher education participation under employment is a useful indicator of the extent of macroeconomic disequilibrium in the graduate labour market we conclude that governments should monitor graduate underemployment but that higher education policy should be based on social returns and should recall higher education s wider purposes

incentives in organizations n 1975 steven kerr published on the folly of rewarding a while hoping for b the argument was simple you get what you pay for kerr distilled this unifying theme from a disparate set of examples involving politicians soldiers doctors orphanage directors professors and students as well as manufacturing and clerical employees and even human resource managers from these examples kerr pp 77980 concluded that two main causes of distorted incentives are fascination with an objective criterion where individuals seek to establish simple quantifiable standards against which to measure and reward performance and overemphasis on highly visible behaviors when some parts of the task are highly visible while others are not it took agency theory 15 years to express kerr s title not to mention to evaluate or extend his conclusions during this period agency theory was obsessed with the tradeoff between incentives and insurance even though clear eyed observations like kerr s about the design and performance of real incentive contracts suggested that several other issues are at least as important fortunately recent work has brought agency theory not only to kerr s position but beyond in this paper i summarize four new strands in agency theory that help me think about incentives in real organizations as a point of departure i begin with a quick sketch of the classic agency model i then discuss static models of objective performance measurement that sharpen kerr s argument repeated game models of subjective performance assessments incentives for skill development rather than simply for effort and incentive contracts between versus within organizations i con

joint liability versus individual liability in credit contracts abstract i offer an explanation for the coexistence of joint liability and individual liability microcredit contracts i show that both contracts maximize welfare when credit is rationed due to limited liability but for different borrowers borrowers monitor each other when liability is joint while the lender monitors individual loans joint liability offers poorer borrowers larger loans with less monitoring effort than would have to be exerted by the lender individual liability offers the wealthier among credit constrained borrowers larger loans even without monitoring the theory explains why individual loans serve the wealthier among poor borrowers and are larger and why businesses funded with individual loans grow more

college wage premiums and skills a cross country analysis workers with a college degree earn substantially more than workers with no such degree using recent data from 22 oecd organization for economic cooperation and development countries we estimate this college wage premium at 28 per cent for male full time working employees on average ranging from 18 per cent in sweden to 50 per cent in the slovak republic this premium is largely explained by the higher skill levels of graduates from higher education combined with their use of these skills at work as well as the match with job requirements for this skill proficiency and skill use we find no effect of labour market institutions e g the employment protection legislation or the coverage rate on cross country differences in the college wage premium however we find that cross country variation in this premium is related to the relative supply of higher educated workers moreover we find evidence that cross country differences in the college wage premium are related to the degree to which educational credentials signal skills

endogenous groups and dynamic selection in mechanism design abstract we create a dynamic theory of endogenous risk sharing groups with good internal information and their coexistence with relative performance individualistic regimes which are informationally more opaque inequality and organizational form are determined simultaneously numerical techniques and succinct reformulations of mechanism design problems with suitable choice of promised utilities allow the computation of a stochastic steady state and its transitions regions of low inequality and moderate to high wealth utility promises produce the relative performance regime while regions of high inequality and low wealth produce the risk sharing group regime if there is a cost to prevent coalitions risk sharing groups emerge at high wealth levels also transitions from the relative performance regime to the group regime tend to occur when rewards to observed outputs exacerbate inequality while transitions from the group regime to the relative performance regime tend to come with a decrease in utility promises some regions of inequality and wealth deliver long term persistence of organization form and inequality while other regions deliver high levels of volatility

bundling decisions in procurement auctions with sequential tasks abstract this paper investigates the principal s bundling decision during a procurement auction for a project consisting of two sequential tasks in which task externality exists and information arrives sequentially we show that although increasing the number of bidders in the market for the second task always tilts the principal s choice toward unbundling increasing the number of consortiums that can perform both tasks tilts the principal s preference toward bundling if the externality is negative

job polarization in europe the structure of employment is always changing and economists are always trying to understand those changes in the 1990s the idea of skill biased technological change sbtc was used to understand the shift in employment toward more educated workers see david h autor and lawrence f katz 1999 for a survey however in recent years it has become appar ent that a more nuanced approach is needed the idea of sbtc might lead one to predict a uni form shift in employment away from low skilled and toward high skilled occupations but studies for the united states autor katz and melissa s kearney 2006 and the united kingdom goos and manning 2007 have shown that there is growth in employment in both the high est skilled professional and managerial and lowest skilled personal services occupations with declining employment in the middle of the distribution manufacturing and routine office jobs this is what goos and manning 2007 term job polarization although see the introduc tion to goos and manning 2007 for antecedents of these ideas there are several hypotheses about the rea sons for job polarization first the routiniza tion hypothesis first put forward by autor frank levy and richard murnane 2003 sug gests that the effect of technological progress is to replace routine labor which tends to be clerical and craft jobs in the middle of the wage distribution second there is the view that globalization in general and offshoring in par ticular is an important source of change in the job structure in the richest countries see for example alan s blinder 2007 third there may be a link between job polarization and

beneficial collusion in corruption control the case of nonmonetary penalties abstract we analyze a corruption model where a principal seeks to control an agent s corruption by supplementing a costless noncollusive outside detector such as the media with a collusive internal supervisor the principal s objective is to minimize the overall costs made up of enforcement costs and social costs of corruption if the penalties on the corrupt agent and a failing supervisor are nonmonetary in nature and yet the two parties can engage in monetary side transfers the principal may stand to benefit by allowing supervisor agent collusion this benefit may even prompt the principal to actively encourage collusion by hiring a dishonest supervisor in strict preference over an honest supervisor

collusion delegation and supervision with soft information this paper derives an equivalence principle between organizational forms of supervisory and productive activities we consider an organization with an agent privately informed on his productivity and a risk averse supervisor getting signals on the agent s type in a centralized organization the principal can communicate and contract with both the supervisor and the agent however these two agents can collude against the principal in a decentralized organization the principal only communicates and contracts with the supervisor who in turn sub contracts with the agent we show that the two organizations achieve the same outcome we discuss this equivalence and provide various comparative statics results to assess the e ciency of supervisory structures

costs efficiency and economies of scale and scope in the english higher education sector an understanding of the production and cost technology of higher education institutions is of considerable policy interest as it motivates the structure of the sector how large universities should be and what mix of outputs they should produce we review the literature and using data for english institutions in 2013 14 apply appropriate frontier methods to model the structure of costs in this diverse sector in doing so we uncover information about the returns to scale and scope within the higher education sector in particular the class of institutions comprising larger research intensive universities and small specialist institutions could benefit from further concentrating postgraduate and research activity we find that the universities comprising the english higher education sector are largely efficient measured relative to observed practices and that there is little scope for gains in technical efficiency from allocating resources on the basis of efficiency scores

role of linking mechanisms in multitask agency with hidden information we investigate the adverse selection problem where a principal delegates multiple tasks to an agent we characterize the virtually implementable social choice functions by using the linking mechanism proposed by jackson and sonnenschein 2007 that restricts the message spaces the principal does not require any incentive wage schemes and can therefore avoid any information rent and welfare loss we show the resemblance between the functioning of this message space restriction and that of incentive wage schemes we also extend the results of the single agent model to the multi agent model

to build or not to build normative and positive theories of public private partnerships abstract this paper analyzes whether the two tasks of building infrastructures which are socially useful in providing public services and managing these assets should be bundled or not when performance contracts can be written both tasks should be performed altogether by the same firm if a better design of the infrastructure helps also to save on operating costs otherwise tasks should be kept apart and undertaken by different units in incomplete contracting environments we isolate conditions under which either the traditional form of public provision of services or the more fashionable public private partnership emerges optimally the latter dominates when there is a positive externality and the private benefits from owning assets are small enough finally we take a political economy perspective and study how incentive schemes are modified under the threat of capture of the decision makers much of the gains from bundling may be lost in this case

efficiency effectiveness and implementation feasibility of energy efficiency rebates the renove plan in spain abstract state sponsored incentive policies frequently include subsidies or rebates for the purchase of more efficient appliances however more research is required into the effects of this tool in isolation a case in point is the so called renove plan in spain first the inefficiency losses dead weight losses associated with energy efficiency rebates must be taken into account such a policy may also encourage the large scale purchasing of energy efficient appliances which may finally result in an increase in electricity consumption rebound effect furthermore although a subsidy is more widely accepted than other tools from social and political viewpoints especially than taxes the fiscal consolidation challenge faced by many countries reduces the scope for environmental policy measures on the expenditure side of the budget and strengthens the need to use taxes to meet the agreed policy objectives this paper shows that the current application of the spanish renove plan with rebates on the dishwasher market for energy efficient appliances generates some welfare losses a rebound effect and a considerable deficit in public budgets the paper examines and assesses the effect of different combinations of taxes and rebates in the case of dishwashers in spain based on their performance in terms of economic efficiency environmental effectiveness and implementation feasibility

collusion in organizations the principal agent theory developed in the 1980s has produced a large set of insights for understanding how contracts can be established within organizations this theory explains how a principal who offers a contract to an agent should structure this contract to overcome at least partially the asymmetries of information he faces by now optimal contracts with adverse selection or hidden knowledge with moral hazard or hidden action or with nonverifiability by a third party of some variables known ex post by both the principal and the agent are relatively well understood despite insightful extensions to multiagent or multiprincipal organizations this body of knowledge falls short of a comprehensive theory of organizations one major reason beyond the restrictive nature of the organizations studied lies in the noncooperative approach generally followed to model multiagent settings indeed in this standard paradigm the cooperation of agents desired by the principal can be induced by the contracts he offers to the agents each of them maximizing his own welfare given the behavior of the other agents what remains is that the principal has complete control of the game played by the agents unwanted communication or side contracting between agents can be prevented this is a rather unrealistic assumption contract theory teaches us that the principal structures the contracts so as to minimize the informational rents given up to the agents because of their informational advantages it is quite natural to expect a collective reaction on the part of the agents to protect their rents we need to understand how agents can react to the rules of an organization and beyond to understand how a principal who is aware of the incentives for collusion should design the organization modeling coalitional or collusive behavior and characterizing the regulatory responses to such behavior is a major task of organization theory the empirical relevance of this line of work is easy to establish a clear example is that of auctions for which the occurrence of cooperative behavior between bidders is a general and well documented phenomenon see porter and zona 1993

the provision of incentives in firms i ncentives are the essence of economics despite many wide ranging claims about their supposed importance there has been little empirical assessment of incentive provision for workers the purpose of this paper is to critically overview existing work on the provision of incentives since the interests of workers and their employers are not always aligned a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm s interest this literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers these include piece rates options discretionary bonuses promotions profit sharing efficiency wages deferred compensation and so on my objective here is to evaluate this literature in the light of a growing empirical literature on compensation where possible i will address the literature from two perspectives first an underlying assumption of this literature is that individuals respond to contracts that reward performance accordingly i consider whether agents behave in this way and whether these responses are always in the firm s interest second i address whether firms write contracts with these responses in mind in other words do contracts look like the predictions of the theory incentives are provided to workers

the economics of higher education this paper describes the expansion of higher education he in oecd countries and discusses its economic consequences for most governments this expansion has been seen as the silver bullet that improves economic growth and helps tackle problems of inequality however in most countries increasing numbers of graduates are going into jobs that were once done by non graduates raising the concern that the true social returns to he expansion are low because of this it is unsurprising that economists have found it difficult to establish firm links between higher education expansion and economic growth at the same time in some countries he expansion has exacerbated problems of economic and social inequality the paper argues that governments need to take a more realistic view of the role of he consider alternative ways of preparing people for the labour market and at the same time explore more rigorously exactly how the sector is conducting itself

consumer responses towards home energy financial incentives a survey based study abstract residential energy efficient and renewable energy eere products play an important role in energy conservation and carbon emissions reduction various financial incentive programs have been developed to promote the adoption of these products however their effectiveness in attracting consumers is not very well understood in this study we investigated impacts of financial incentives on homeowner s decision making towards six eere products two forms of incentives tax credits and interest free loans were examined through a household mailing survey in florida the united states results showed that although half of the respondents were interested in eere products the high investment cost was a major concern that hindered their purchase activities homeowners were attracted to financial incentives and valued tax credits much higher than interest free loans the current federal home energy tax credit levels were found to attract only 2 12 percent of homeowners to buy eere products the willingness of participation was especially low for the costly products such as solar panels the participation rate was also very low for lower income i e annual household income below 50 000 families living in older residences this study contributes to the understanding of economic and social aspects of consumer decision making on energy efficiency and alternative energy

the embodiment of knowledge universities as engines of growth as universities open themselves up to the marketplace for knowledge and ideas to a greater degree than in the past debates over university missions has been common how can universities match their third mission contribution to society with their main missions of education and curiosity driven basic research to achieve their full growth potential this will require a change in policy attention from targeting university patenting and faculty spin offs to taking a broader view on universities contribution to economic development including other pathways most notably collaborative modes and mobility of trained human capital from academe to industry

design of incentive programs for accelerating penetration of energy efficient appliances abstract incentives are policy tools that sway purchase retail stocking and production decisions toward energy efficient products incentives complement mandatory standards and labeling policies by accelerating market penetration of products that are more energy efficient than required by existing standards and by preparing the market for more stringent future mandatory requirements incentives can be directed at different points in the appliance s supply chain one point may be more effective than another depending on the technology s maturity and market penetration this paper seeks to inform future policy and program design by categorizing the main elements of incentive programs from around the world we identify advantages and disadvantages of program designs through a qualitative overview of incentive programs worldwide we find that financial incentive programs have greater impact when they target highly efficient technologies with a small market share and that program designs depend on the market barriers addressed the target equipment and the local market context no program design is inherently superior to another the key to successful program design and implementation is a thorough understanding of the market and identification of the most important local obstacles to the penetration of energy efficient technologies

technology enhanced learning and higher education this article surveys current and emerging practice in technology enhanced learning in higher education the article uses disruptive innovation as a lens to examine technology enhanced learning disruptive innovation focuses on simple and convenient technologies which disrupt markets for existing goods and services the article argues that disruptive technologies are used frequently in higher education but also that students practise demarcation using different technologies to support their learning lives and their social lives the article further argues that current practice in technology enhanced learning has implications for the design and use of emerging technologies such as massive open online courses and emerging practices such as bring your own device and learning analytics as well as having implications for cost structures and for the future of higher education as a whole

reducing incremental costs associated with the delegation of incentive contracting decisions an analysis of planning and control decisions in a manufacturing setting in the presence of moral hazard abstract we compare and contrast two specific regimes involving the centralization and delegation of the incentive contracting decision in manufacturing organizations in the centralization regime a single individual simultaneously makes the allocation of demand to production facilities and determines the incentive compensation scheme for the managers at the facilities under the delegation regime the demand allocation is decided upon initially by a superior and the incentive contracting decision is subsequently made by a subordinate who is neither of the two managers in charge of the production facilities using the principal agent paradigm which assumes that the managerial efforts are unobservable we demonstrate that the centralization regime performs no worse than the delegation regime for situations where strategic or other requirements necessitate firms to opt for the delegation of the incentive contracting decision we propose a heuristic that significantly increases the likelihood of mimicking the allocation and contracting decisions made under the centralized regime

cost effective subsidy incentives for room air conditioners in china an analysis based on a mcfadden type discrete choice model abstract based on a mcfadden type conditional logit cl discrete choice model this paper estimates the most economic subsidy level mesl for room air conditioners racs in china that minimizes the net cost of subsidy per unit of electricity saved the analysis reveals that given the current price and efficiency spectrum of racs in the chinese market as well as the electricity price and cooling demand of chinese households the mesl for racs in china should be around 60 which is much higher than the current subsidy level of 5 15 a sensitivity analysis suggests that the high mesl 60 is mainly a consequence of relatively low electricity price and household cooling demand in the country if china s household cooling demand increases further and its electricity price were to rise to a higher level the mesl for racs could possibly drop to about 5 15 as household cooling demand varies among chinese cities in different climatic zones and at different levels of economic development the rac subsidy incentives should be region specific with necessary modifications the method for analysis proposed in this paper can also be applied to other household appliances to prioritize the types of appliances requiring subsidies

how the removal of energy subsidy affects general price in china a study based on input output model abstract in china most energy prices are controlled by the government and are under priced which means energy subsidies existing reforming energy subsidies have important implications for sustainable development through their effects on energy price energy use and co 2 emission this paper applies a price gap approach to estimate china s fossil fuel related subsidies with the consideration of the external cost results indicate that the magnitude of subsidies amounted to cny 1214 24 billion in 2008 equivalent to 4 04 of gdp of that year subsidies for oil products are the largest followed by subsidies for the coal and electricity furthermore an input output model is used to analyze the impacts of energy subsidies reform on different industries and general price indexes the findings show that removal of energy subsidies will have significant impact on energy intensive industry and consequently push up the general price level yet with a small variation removing oil products subsidies will have the largest impact followed by electricity coal and natural gas however no matter which energy price increases ppi is always the most affected then gdp deflator with cpi being the least corresponding compensation measures should be accordingly designed to offset the negative impact caused by energy subsidies reform

strategic aspects of vertical delegation abstract this paper offers an overview of the strategic aspects of situations where either institutionally or contractually a firm delegates some of its decisions to another firm a subsidiary an internal division etc delegation may have several kinds of strategic benefits in the short term it may improve the competitive position of the firm or induce a more lenient behavior from its competitors in the long run it may be used to deter the entry of potential competitors to foreclose market access or to induce actual competitors to exit the paper analyzes the trade off between these possible benefits and the agency costs of delegation and emphasizes the key issues of credibility and commitment

on manufacturing marketing incentives stereotypically marketing is mainly concerned about satisfying customers and manufacturing is mainly interested in factory efficiency using the principal agent agency paradigm which assumes that the marketing and manufacturing managers of the firm will act in their self interest we seek incentive plans that will induce those managers to act so that the owner of the firm can attain as much as possible of the residual returns one optimal incentive plan can be interpreted as follows the owner subcontracts to pay the manufacturing manager a fixed rate for all capacity he delivers each marketing manager receives all of the returns from his product in turn all managers pay a fixed fee to the owner under this plan the marketing managers will often complain about the stock level decisions even though these levels are announced in advance under a revised plan the owner can eliminate such complaints by delegating the stocking decisions to the respective marketing managers without any loss this plan is interpreted as requiring the owner to make a futures market for manufacturing capacity paying the manufacturing manager the expected marginal value for each unit of capacity delivered receiving the realized marginal value from the marketing managers and losing money on average in the process

comparing model results to national climate policy goals results from the asia modeling exercise abstract while the world has yet to adopt a single unified policy to limit climate change many countries and regions have adopted energy and climate policies that have implications for global emissions in this paper we discuss a few key policies and how they are included in a set of 23 energy and integrated assessment models that participated in the asia modeling exercise we also compare results from these models for a small set of stylized scenarios to the pledges made as part of the copenhagen accord and the goals stated by the major economies forum we find that the targets outlined by the united states the european union japan and korea require significant policy action in most of the models analyzed for most of the models in the study however the goals outlined by india are met without any climate policy the stringency of climate policy required to meet china s copenhagen pledges varies across models and accounting methodologies

the economic and distributional implications of current policies on higher education the british government s policy towards expanding higher education is based on two beliefs that it is necessary for an improvement of economic performance and that it can increase access to better jobs by those from lower socio economic backgrounds this article examines these two beliefs the evidence on the economic impact of and demand for more graduates is ambiguous and contradictory meanwhile the rest of the vocational and education system is likely to suffer damage as a consequence of the expansion of higher education which is important in an economy where there remain many jobs with educational requirements below degree level it is doubtful whether higher education is an effective or efficient means of meeting such demand given the present social class composition of higher education entry there is a danger that further expansion unless accompanied by a fundamental redistribution of access opportunities will lead to a decline in social mobility at the same time the range of labour market opportunities for those without degrees may get worse

cooperation and competition in organizations a dynamic perspective abstract in static principal agent relationships cooperation and competition among agents both yield higher welfare than independent compensation both modes of job design improve the tradeoff between risk and explicit incentives in dynamic settings welfare is also affected by implicit incentives in particular the ratchet effect i characterize the effects of job design decisions on implicit incentives showing that they differ in nature from explicit incentive effects and may be the dominant ones even if a decision about job design improves the static risk incentive tradeoff it may worsen the ratchet effect by so much that welfare falls

decentralization and collusion abstract we consider a model where agents work in sequence on a project share information not available to the principal and can collude due to limited liability the coase theorem does not apply the distribution of surplus among the agents is therefore an important control variable for the principal which gives us a theory of how to delegate in an organization subject to moral hazard the optimal distribution of surplus can always be achieved by delegating in the right way decentralization without using message games journal of economic literature classification numbers d23 d82 l14 l22

correlation and relative performance evaluation this paper reexamines the issue of relative versus joint incentive schemes in a multi agent moral hazard framework the model allows a full analysis of the information and dependence structure an important result is that the widespread notion that greater correlation in outcomes calls for more competition is not robust first when the dependence structure is effort sensitive the optimal incentive scheme in general mixes elements of relative evaluation and joint evaluation second under limited liability higher equilibrium correlation tends to make joint performance evaluation more desirable examples are provided regarding incentives in firms finance and innovation

contracts under wage compression a case of beneficial collusion this paper considers a principal agent model with adverse selection and limited wage discrimination under wage compression an agent may have an incentive to free ride on other agents by manipulating his private information when collusion among the agents is not possible the principal distorts the output schedule to reduce information rent associated with the free riding opportunity under collusion however the principal can reduce the information rent by inducing side contracts among the agents thus partly removing the distortion in the output schedule we show that side contracts among the agents take place in equilibrium and that the prospect of collusion is beneficial

collusion and biased tournaments abstract tournaments are vulnerable to collusion this paper finds that biased tournaments can be more effective at preventing collusion than unbiased ones when agents can collude to exert low effort introducing some bias into tournaments generates opposite effects on favored and disfavored agents respective incentives to exert high effort and provides strong incentives for the favored agent to deviate from collusion introducing an adequate degree of bias reduces the principal s incentive cost for preventing collusion however granting excessive bias instead increases the incentive cost we show that the optimal level of bias can be endogenously determined

contracting with self esteem concerns it is widely accepted in social psychology that the need to maintain and enhance self esteem is a fundamental human motive we incorporate this factor into an otherwise ordinary principal agent framework and examine its impact on the optimal incentive scheme and the agent s behavior especially focusing on the form of intrapersonal strategy known as self handicapping incorporating self esteem concerns into a contracting situation yields an implication that runs counter to conventional wisdom that is the standard tradeoff between risk and incentives may break down i e more uncertainty reduces agency cost and hence results in stronger incentives in the presence of self esteem concerns this is because uncertainty mitigates the need for self handicapping this result provides a possible reason for why we do not empirically observe this tradeoff in a robust manner we present an intuitive condition for this anomaly to arise and provide a set of testable implications the present framework also reveals why and how team production can be made more profitable by providing an explanation for the increasing popularity of team production finally this simple logic is applied to identify additional implications for the hidden costs of external enforcers such as evaluation and monitoring which are discussed extensively in social psychology

university funding and student funding international comparisons in this article we compare the mechanisms for funding higher education institutions across a set of oecd countries first some data on public and private funding levels are presented the article then discusses two important trends i the increased presence of cost sharing and ii the move towards performance based funding we show where countries differ in terms of the fees paid by students and the financial support received by students using the degree of output orientation and the degree of centralization as dimensions to classify the various countries funding mechanisms differences may be shown between countries reforms in funding approaches inspired by new public management thinking are discussed one such reform is the introduction of performance agreements that increasingly underlie the public budget of universities we focus on the drivers of the reforms and the question of whether these reforms actually matter for the performance of national higher education systems for instance on the issue of student completion rates

estimating individual discount rates in denmark a field experiment we estimate individual discount rates with respect to time streams of money using controlled laboratory experiments these discount rates are elicited by means of field experiments involving real monetary rewards the experiments were carried out across denmark using a representative sample of 268 people between 19 and 75 years of age individual discount rates are estimated for various households differentiated by socio demographic characteristics such as income and age our conclusions are that discount rates are constant over the 12 month to 3 year horizons used in these experiments and that discount rates vary substantially with respect to several socio demographic variables hence we conclude that it would be reasonable to assume constant discount rates for specific household types but not the same rates across all households

the neighbor effect simulating dynamics in consumer preferences for new vehicle technologies abstract understanding consumer behaviour is essential in designing policies that efficiently increase the uptake of clean technologies over the long run expert opinion or qualitative market analyses have tended to be the sources of this information however greater scrutiny on governments increasingly demands the use of reliable and credible evidence to support policy decisions while discrete choice research and modeling techniques have been applied to estimate consumer preferences for technologies these methods often assume static preferences this study builds on the application of discrete choice research and modeling to capture dynamics in consumer preferences we estimate canadians preferences for new vehicle technologies under different market assumptions using responses from two national surveys focused on hybrid gas electric vehicles and hydrogen fuel cell vehicles the results support the relevance of a range of vehicle attributes beyond the purchase price in shaping consumer preferences towards clean vehicle technologies they also corroborate our hypothesis that the degree of market penetration of clean vehicle technologies is an influence on people s preferences the neighbor effect finally our results provide behavioural parameters for the energy economy model cims which we use here to show the importance of including consumer preference dynamics when setting policies to encourage the uptake of clean technologies

national vs european incentive policies bargaining information and coordination abstract we build a hierarchical model of contractual relationships under moral hazard to address issues about subsidiarity i e optimal de centralization of incentive industrial policies at the national level or at the european community level incentive policy is viewed as an incentive contract for producers who take unobservable decisions that have spillover effects across member states a community agency designs contracts for producers and contractual compensatory transfers between states on the basis of its observations then national regulators and their home producers negotiate according to a generalized nash bargaining a national contract that complements the community contracts given that national regulators will have access to more observations on the producers activities in this setting we show that full centralization is never optimal we give sufficient conditions for complete decentralization to be optimal and when both policies are present we characterize how they interact to provide incentives to producers

a note on the optimal structure of production abstract we analyze the advantages of centralization and decentralization in industries in which production takes place in several stages and the costs are privately observed by the agents in charge of production we demonstrate that informational diseconomies arise when uncorrelated information is concentrated in the hands of a single agent these diseconomies arise when the stages of production are different activities with different cost supports journal of economic literature classification numbers d82 l22 l51

coalitions incentives and risk sharing abstract this paper analyzes the effects of coalitional behavior in principal multiagent relationships with moral hazard and identifies cases where the principal prefers agents to form a coalition via side contracting it is shown that the principal can implement given efforts via non individualistic incentive contracts at a lower cost when the agents can monitor each other s efforts perfectly and hence coordinate their effort choice than when the agents behave independently permitting the principal to utilize more complex communication mechanisms does not alter the result for there is no coalition proof revelation mechanism improving the principal s welfare journal of economic literature classification number d82

career concerns monetary incentives and job design we study optimal incentive contracts when commitments are limited and agents have multiple tasks and career concerns the agent s career concerns are determined by the outside market we show that the principal might want to give the strongest explicit incentives to agents far from retirement to account for the fact that career concerns might induce behavior in conflict with the principal s preferences furthermore we show that maximized welfare might be decreasing in the strength of career concerns that optimal incentives can be positively correlated with various measures of uncertainty and that career incentives have strong implications for optimal job design

subjective discount rates in the general population and their predictive power for energy saving behavior why do people sometimes refrain from saving energy even if it would pay off in monetary terms subjective discount rates present one possible explanation for this lack of foresight but little is known about their level and reliability in the general population with regard to behavior persons with lower discount rates are expected to accept additional costs upfront more readily than those with higher discount rates based on a representative nation wide study the swiss environmental survey 2007 and a follow up survey our analyses reveal that on average subjective discount rates are well above market interest rates and moderately stable over a time interval of four years income and education are negatively correlated with discount rates contrary to expectations we did not find convincing support for an impact of discount rates on energy saving behavior

the college wage premium and the expansion of higher education in the uk this paper reports estimates of the uk college premium for young graduates across successive cohorts from large cross section datasets for the uk pooled from 1994 to 2006 a period when the higher education participation rate increased dramatically the growth in relative labour demand suggests that graduate supply considerably outstripped demand which ought to imply a fall in the premium we find no significant fall for men and even a large but insignificant rise for women quantile regression results reveal a fall in the premium only for men in the bottom quartile of the distribution of unobserved skills

labeling energy cost on light bulbs lowers implicit discount rates lighting accounts for nearly 20 of overall u s electricity consumption and 18 of u s residential electricity consumption a transition to alternative energy efficient technologies could reduce this energy consumption considerably to quantify the influence of factors that drive consumer choices for light bulbs we conducted a choice based conjoint field experiment with 183 participants we estimated discrete choice models from the data and found that politically liberal consumers have a stronger preference for compact fluorescent lighting technology and for low energy consumption greater willingness to pay for lower energy consumption and longer life was observed in conditions where estimated operating cost information was provided providing estimated annual cost information to consumers reduced their implicit discount rate by a factor of five lowering barriers to adoption of energy efficient alternatives with higher up front costs however even with cost information provided consumers continued to use implicit discount rates of around 100 which is larger than that experienced for other energy technologies