Journal of Economic Perspectives: Vol. 12 No. 4 (Fall 1998)


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Incentives in Organizations

Article Citation

Gibbons, Robert. 1998. "Incentives in Organizations." Journal of Economic Perspectives, 12(4): 115-132.

DOI: 10.1257/jep.12.4.115


In this paper, the author summarizes four new strands in agency theory that help him think about incentives in real organizations. As a point of departure, The author begins with a quick sketch of the classic agency model. He then discusses 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. The author concludes by suggesting two avenues for further progress in agency theory: better integration with organizational economics, as launched by Coase (1937) and reinvigorated by Williamson (1975, 1985), and cross-pollination with other fields that study organizations, including industrial relations, organizational sociology, and social psychology.

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Gibbons, Robert (MIT and NBER)

JEL Classifications

D23: Organizational Behavior; Transaction Costs; Property Rights
L14: Transactional Relationships; Contracts and Reputation; Networks


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