Incentive Structures Maximizing Residual Gain under Incomplete Information

Abstract

In a two-agent setting, one agent ("landlord") seeks to maximize his residual gain, i.e., that part of output remaining after payment of a reward to the other agent ("worker"). The reward must be a function of the worker's output since his effort cannot be directly observed, and the landlord must choose this function without knowing the worker's disutility and productivity parameters. A 50-50 split turns out to be the maximin (regret) solution in a broad class of cases, even if discontinuous reward functions are permitted. This "sharecropping" model suggests itself in problems where the first agent represents the government and the residual gain serves a paramount national or social objective.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 120 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.