This paper studies optimal sales force compensation plans in a multi-period moral-hazard model when the firm wants to implement high effort in every period but only obtains aggregate information on sales. The sales agent chooses effort each period after observing previous sales and his incentive responsiveness might change over time. The paper derives conditions under which a linear incentive s...

This paper analyzes optimal contracts in a linear hidden-action model with normally distributed returns possessing two moments that are governed jointly by two agents, who can observe each others’ effort levels and draft enforceable side–contracts on chosen effort levels and realized returns. After showing that standard constraints, resulting in incentive–contracts, may fail to ensure implement...

File swarming is a popular method of coordinated download by which peers obtain a file from an under-provisioned server. Critical problems arise within this domain when users act selfishly, yet most systems are built with altruism assumed. Working under the assumption that all peers are greedy, we introduce the Fair, Optimal eXchange (FOX) protocol. FOX, in addition to effective and robust appl...

This work introduces a new method for computing the incentive Stackelberg solution. Stackelberg games are models for decision making situations, where the parties, called players, act in predetermined order. The first is called the leader and the others are followers. In an incentive game the leader can commit to a decision that depends on the followers' moves. This kind of a strategy is called...

This paper reexamines the issue of relative versus joint incentive schemes in a multiagent moral hazard framework. It allows to contrast the inference dimension and the insurance property of relative performance evaluation. Importantly, the widespread idea that the principal should use all the more competitive schemes that the equilibrium outcomes are more correlated is shown not to be robust. ...

The NHS Plan welcomes the use of team rewards but does not specify how team based incentives are to be implemented or make clear what types of teams such incentives are to be given to. This paper looks for insights from economic theory on how to define teams and optimal incentive schemes within them. We give a brief description of the incentive mechanisms suggested in the NHS Plan and discuss t...

On the Hidden Costs of Incentive Schemes By enriching a principal-agent model it is shown that the introduction of monetary incentives may reduce an agent’s motivation. In a first step, we allow for the possibility that some agents stick to unverifiable agreements. The larger the fraction of reliable agents, the lower powered will then be the optimal incentive scheme and fixed wages become opti...

We address the problem of maximizing the social welfare in a peer-to-peer streaming overlay given a fixed amount of server upload capacity. We show that peers’ selfish behavior leads to an equilibrium that is suboptimal in terms of social welfare, because selfish peers are interested in forming clusters and exchanging data among themselves. In order to increase the social welfare we propose a n...

In the supply-chain literature, an increasing body of work studies how suppliers can use incentive schemes such as quantity discounts to influence buyers’ ordering behaviour, thus reducing the supplier’s (and the total supply chain’s) costs. Various functional forms for such incentive schemes have been proposed, but a critical assumption always made is that the supplier has full information abo...

I this paper we propose an incentive payment contract for stochastic projects defined by a series of stages or tasks that are outsourced to independent subcontractors. Projects defined by sequentially completed independent stages are common in new product development and other high-risk projects. Our goal is to maximize the client’s expected discounted profit. Our proposed contract reflects the...