Abstract
America’s elementary and secondary educational system is faced with an inefficiency stemming from a basic problem associated with unobservability: moral hazard. In this case, the teacher (agent) has an incentive to exert less effort (given cost associated with more work) if the school district (principal) cannot distinguish between low student performance due to a lack of teacher effort and low student performance due low student quality (random variable). This research develops an optimal incentive scheme that guarantees the teacher a fixed payment, plus a variable payment that would be a function of teacher ‘action’ variables thereby reducing moral hazard.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
