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The theory of incentives: an overview. (English) Zbl 0556.90004
Advances in economic theory, 4th World Congr. Econ. Soc., Aix-en- Provence/France 1980, Econ. Soc. Monogr. Quant. Econ 1, 31-94 (1982).
[For the entire collection see Zbl 0513.00016.]
The authors explain in the introduction the subject matter of the theory of incentives and its distinction from the theory of teams and social choice theory. In the theory of incentives a planner or principal faces problems which stem from the lack of coincidence of his objectives with those of the agents. For example, problems of moral hazard and adverse selection are involved. The authors present a formal model and show that the models discussed in the literature are special cases of this general model. As an illustration of the theory the authors discuss a model for the selection of a public project. Both authors have made a number of contributions to the theory of incentives. The paper will be particularly valuable to researchers in this area and should be read in conjunction with Chapter 1 and 3 in this volume.
Reviewer: D.Glycopantis

MSC:
91B14 Social choice
90-02 Research exposition (monographs, survey articles) pertaining to operations research and mathematical programming