Incentive Theory


Asymmetric information gives rise to pervasive problems in economic relationships. In this video Stephane Saussier explains how setting the right incentives could be a solution. However, there will be a rent extraction/efficiency trade-off. The theoretical framework has been developed in the 70’s by economists such as Baron & Myerson, Laffont, Tirole and many others.


Akerlof, G. (1970). The Market for Lemons: Qualitative Uncertainty and the Market Mechanism. Quarterly Journal of Economics, 84(3), 488–500.