High-Powered Incentives and Communication Failure

Abstract

This paper uses a donor-provider-agent framework to study the role of provider incentives for the delivery of developmental goods like aid, credit, or technology transfer to the poor. The paper considers a situation where credible communication by the provider is the key to successful delivery. The study shows that the use of high-powered incentives can lead to breakdown of communication between providers and agents, leading to undesirable outcomes. The paper studies the interplay between incentives and communication in the presence of typical and motivated providers and finds that in certain situations incentivization leads to worse outcomes.

Keywords: Knowledge Management, Democratic Government, Information Policy, Document & Information Identifiers, Economic Theory & Research, Economic Growth, ICT Applications, Document Management & Policies, Public Sector Administrative & Civil Service Reform, Administrative & Civil Service Reform, Information Architecture, Labor Policies, De Facto Governments, Information Policy & Strategy, Information and Records Management, Library Management & Policies, Library Management, Inequality, Industrial Economics, Document Management, Labor Markets, Rural Labor Markets, Public Sector Administrative and Civil Service Reform