The Performance Contracting Concept, Appendix

A Critique of the Theory

by James P. Stucker


Download eBook for Free

FormatFile SizeNotes
PDF file 1.3 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.


Purchase Print Copy

 FormatList Price Price
Add to Cart Paperback56 pages $20.00 $16.00 20% Web Discount

Summary of the major theoretical articles bearing on the theory of performance contracting. Although no general definitive statement on the theory has been found, most of the major elements are presented. Two especially pertinent contributions are reviewed to provide a foundation for a fully articulated theory of performance contracting: "A Formal Theory of the Employment Relationship," by H. A. Simon; and "Optimal Rewards in Incentive Systems," by G. M. Yowell, Jr. Other articles concern the theory of incentives for cost reduction. Simon's work is based on the assumption that it may be advantageous to defer production decisions; Yowells' theory of incentives concerns situations in which the agent makes production decisions early in the contract. If the theory of incentives were broadened to include the agent's response to unforeseen events, it would become a more realistic theory and would nearly constitute a theory of performance contracting.

This report is part of the RAND Corporation Report series. The report was a product of the RAND Corporation from 1948 to 1993 that represented the principal publication documenting and transmitting RAND's major research findings and final research.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.