The Ratchet: A dynamic managerial incentive model of the soviet enterprise

Michael Keren; Jeffrey Miller; James R. Thornton

doi:10.1016/0147-5967(83)90059-8

The Ratchet: A dynamic managerial incentive model of the soviet enterprise

Michael Keren^*, Jeffrey Miller, James R. Thornton

^*Corresponding author for this work

Department of Economics

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22 Scopus citations

Abstract

The impact of the ratchet on the level of output that maximizes the present value of the managerial bonus stream is investigated. Using the orthodox USSR incentive scheme, results indicate that the ratchet does not always cause managers to select an output level that is less than the enterprise's full capacity. Nonetheless, the ratchet typically requires maximizing behavior that prevents production at capacity. The results reported for only two periods apply to longer horizons.

Original language	English
Pages (from-to)	347-367
Number of pages	21
Journal	Journal of Comparative Economics
Volume	7
Issue number	4
DOIs	https://doi.org/10.1016/0147-5967(83)90059-8
State	Published - Dec 1983

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abstract = "The impact of the ratchet on the level of output that maximizes the present value of the managerial bonus stream is investigated. Using the orthodox USSR incentive scheme, results indicate that the ratchet does not always cause managers to select an output level that is less than the enterprise's full capacity. Nonetheless, the ratchet typically requires maximizing behavior that prevents production at capacity. The results reported for only two periods apply to longer horizons.",

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The Ratchet: A dynamic managerial incentive model of the soviet enterprise

Abstract

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