Motivating wealth-constrained actors
Abstract
We examine how owners of productive resources (e.g., public enterprises or financial
capital) optimally allocate their resources among wealth-constrained operators of
unknown ability. Optimal allocations exhibit: (1) shared enterprise profit - the resource
owner always shares the operator's profit; (2) dispersed enterprise ownership -resources
are widely distributed among operators of varying ability; (3) limited benefits of
competition - the owner may not benefit from increased competition for the resource;
and, sometimes, (4) diluted incentives for the most capable - more capable operators
receive smaller shares of the returns they generate. Implications for privatizations
and venture capital arrangements are explored. (JEL D82, D44, D20).
Type
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https://hdl.handle.net/10161/2097Collections
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Tracy R. Lewis
Walter M. Upchurch, Jr. Distinguished Professor of Business Administration
Tracy Lewis is a Professor Emeritus of Business Administration at the Fuqua School
of Business at Duke University, where he held the Black Chair in Economics. Professor
Lewis founded the Innovation Center at the University. Prior to joining the Duke University
Faculty in 2003, he served on the faculties at the University of Florida, at the California
Institute of Technology, the University of British Columbia, and the University of
California, Davis. Aside from academic employment, he has also h

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