Center for Economic Research, Department of Economics, University of Minnesota
The cumulative probability distribution F of a random-variable y, the output of a firm, is known to the manager of the firm only. A planning authority wants to elicit from the manager what output can be produced with probability r. The manager is therefore asked the solution of the equation F(x) = r . Production takes place and the value of output is observed by both agents. A bonus is then paid to the manager, computed as a function of his answer and of the level of output. We characterize here all the bonus schemes for which announcing the correct solution of F(x) = α is the manager's best strategy. Some important additional properties of these schemes are studied in a second part of the paper.
Thomson, W., (1978), "Eliciting Production Possibilities from a Well-Informed Manager", Discussion Paper No. 96, Center for Economic Research, Department of Economics, University of Minnesota.
Eliciting Production Possibilities from a Well-Informed Manager.
Center for Economic Research, Department of Economics, University of Minnesota.
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