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
Journal articlePermalink
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 Professor of Economics at the Fuqua School of Business at Duke University,
where he holds 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 held positions at the Fed
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