Rolls Royce Erp Implementation Essay

9823 Words May 11th, 2011 40 Pages
American Economic Association

Incentives in Organizations Author(s): Robert Gibbons Source: The Journal of Economic Perspectives, Vol. 12, No. 4 (Autumn, 1998), pp. 115-132 Published by: American Economic Association Stable URL: Accessed: 26/03/2009 10:39
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The economic historians Lee Alston and Robert Higgs analyze three standard sharecropping contracts:wage labor, which imposes no risk on the agent (b = 0); crop sharing, which shares risk between the principal and the agent (O < b < 1); and fixed-payment land rental, which leaves the agent with all the crop risk (b = 1). Higgs (1973) uses cross-sectionaldata on the southern United States for 1910 and finds that counties with greater crop risk made more use of risk-sharing; that is, more use of fixed wages and crop sharing rather than land rental. But Alston and Higgs (1982) show that there is enormous variation within each of these three main classes of contracts.For example, sharing contracts might apply to individuals,families,
' To be fair, there were several early models that studied incentive problems under risk-neutrality,such as delayed payments (Becker and Stigler, 1974; Lazear, 1979), tournaments (Lazear and Rosen, 1981), career concerns (Holmstr6m, 1982) and efficiency wages (Shapiro and Stiglitz, 1984). But none of these models animated the field the way the classic model did.

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or squads, and might be coupled with restrictionson other activities (such as on one's own plot) or asset-useopportunities (such as borrowing the landlord's mule for private purposes). Furthermore,Alston and Higgs also find significant variation in the use of the three classes of contracts even after controlling

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