joint Miltiadis Makris

Pay-for-performance schemes that reward higher output or measurable dimensions of quality are increasingly advocated in the public sector. We investigate the optimal power of linear incentive schemes to finance public-service providers (eg in the health sector, education and child care) and identify conditions under which the presence of motivated agents implies that the power of the incentive scheme is high or low. The analysis is conducted both under symmetric and asymmetric information with respect to agents’ type.

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