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By January 2022, the COVAX international vaccine collaboration had allocated over a billion vaccines to over 140 countries. We describe and review the allocation process chosen, which reflected both an objective of equitably distributing vaccines across the world and the need to fund that mission. We show how vaccine supply limitations and constraints on some countries’ absorptive capacity have affected overall allocative outcomes. We also discuss market design approaches that were considered but not implemented, including the use of an exchange mechanism to better match countries’ vaccine allocations to their preferences, as well as a vaccine brokerage under which countries could sell excess vaccines to countries with ongoing need. Our analysis addresses some criticisms of COVAX, and offers suggestions for agencies organizing global vaccine cooperation for future pandemics.

Vaccinating the world's population quickly in a pandemic has enormous health and economic benefits. We analyze the problem faced by governments in determining the scale and structure of procurement for vaccines. We analyze alternative approaches to procurement, arguing that buyers should directly fund manufacturing capacity and shoulder most of the risk of failure while maintaining some direct incentives for speed. We analyzed the optimal portfolio of vaccine investments for countries with different characteristics as well as the implications for international cooperation. Our analysis, considered in light of the experience of 2020, suggests lessons for future pandemics.

Build more capacity, and stretch what we already have

Vaccinating the world’s population quickly in a pandemic has enormous health and economic benefits. We analyze the problem faced by governments in determining the scale and structure of procurement for vaccines. We analyze alternative approaches to procurement. We find that if the goal is to accelerate the vaccine delivery timetable, buyers should directly fund manufacturing capacity and shoulder most of the risk of failure, while maintaining some direct incentives for speed. We analyzed the optimal portfolio of vaccine investments for countries with different characteristics as well as the implications for international cooperation. Our analysis, considered in light of the experience of 2020, suggests lessons for future pandemics.

We study LAPD police reforms after the Rampart scandal, when formal oversight rose discretely in 1998, and then fell in late 2002. We offer a simple model to interpret how police behavior is affected by changed accountability to the public. We show how officers responded by a practice they labeled “drive and wave”. The arrest-to-crime rate fell 40% after accountability to the public rose, then rebounded to its original level when accountability fell. For the “victimless” crimes of narcotics and prostitution, arrests fall almost 50% and then rebound. No such effects arise for the Los Angeles Sheri Department, even for those stations surrounded by areas policed by the LAPD. We also see no effects on arrests made by other agencies within the LAPD’s jurisdiction. This impact was greatest in predominantly Hispanic neighborhoods, and felt least in White communities. Other behavioral responses – use of force and street stops – tell a similar story. We argue that much of the response may be attributable to an imbalance between oversight done by suspects compared to that done by the victims of crime. We also document an impact on homicides.

A difficult issue for organizations is how to assign valuable resources across competing opportunities. This work describes how Feeding America allocates about 300 million pounds of food a year to over two hundred food banks across the United States. It does so in an unusual way: in 2005, it switched from a centralized queuing system, where food banks would wait their turn, to a market based mechanism where they bid daily on truckloads of food using a “fake” currency called shares. The change and its impact are described here, showing how the market system allowed food banks to sort based on their preferences.

Empirical evidence consistently finds that incentive pay is more frequent when authority is delegated to workers than when their superiors hold authority. We provide a model where incentive pay results in the abuse of authority by their superiors, and (under reasonable conditions) implies that (i) incentive pay is higher when an agent holds control rights than when her principal has authority, (ii) effort is less responsive on the margin to incentive pay when the principal holds authority, and (iii) more incentive pay can reduce effort under authority, even on tasks that can be easily measured.

Empirical evidence on the effect of pay-for-performance on output has been scarce. We propose that worker responses to marginal pay-for-performance changes can be related to their response to a measure of taxes. Using this approach, we suggest a short-run elasticity of output with respect to incentive pay for high earners in the United States of 0.25 or lower, and it is difficult to rule out very low responsiveness. (JEL J33, H24)

Workers act in the interests of their employ? ers for a host of reasons. Sometimes money is the motivation, but often it is because they care about what they do. Despite the importance of such intrinsic motivation, the economic litera? ture has offered little in terms of understanding relevant trade-offs when alignment of inherent preferences (rather than monetary interests) is what motivates people.1 Instead, the literature has focused largely on the efficiency gains that arise from agents sharing the preferences of their employers.2 This paper offers such a theory of intrinsic motivation, where firms partially solve agency problems by hiring agents with particu? lar preferences. Unlike the previous literature, I show that firms, in general, hire agents who do not share their interests?instead, agents are disproportionately motivated to carry out a sub? set of what the firm cares about. Specifically, I show that the institution hires the agent with similar preferences to himself only in the limit? ing case where the agent's preferences are irrel? evant?namely, when output can be perfectly contracted on. Instead, the optimal response of the institution is to hire biased agents, with the degree of bias increasing as contracting mea? sures get worse. The reason for this is rather simple?that jobs within firms are specialized. So, for example, some people make things, others design them, yet other sell them, and so on. Similarly, aca? demics do research, deans raise money, admin? istrators do the books, social workers provide services to clients while their superiors are charged with cost control, etc. The principal novelty of this paper is to show how hiring practices?and specifically the intrinsic moti? vation of those hired?changes as the ability to contract worsens in a world where tasks are specialized. In doing so, it paints a picture of firms responding to noncontractibility by hiring agents with very extreme interests, at the cost of their ignoring other aspects of their jobs. So, for example, if the output of a social worker cannot be measured, a natural response will be to hire agents who are highly motivated to get benefits to clients, at the cost of their ignoring things like cost control. Simple though this observation is, it illustrates a cost to using intrinsic motiva? tion?namely, the endogenous hiring of those who increasingly care only about one aspect of their job. In this way, the simple model outlined here lays the foundation for a view of "poor contracting" firms as fiefdoms, where those with extreme competing interests reside, a point I elaborate on elsewhere (Prendergast 2008). For a theory of intrinsic motivation to be use? ful, firms must have some control over it. The central assumption here is that firms have some ability to hire employees based on these intrin? sic preferences. I build a model of an institution that carries out two activities?say, service pro? vision and cost control. It employs two agents to do so. The tasks are somewhat specialized, in that one agent primarily (but not exclusively) does service provision and the other primarily does cost control. The institution has an objec? tive that trades off these two components and has a performance measure that can reward agents. The firm also chooses whom to hire. Potential * Discussant: Robert Gibbons, Massachusetts Institute of Technology.

Food banks throughout the U.S. provide nutrition to the needy. Much of the food that is distributed through food banks often originates with donors large manufacturers or distributors far from those needy clients. How that food is distributed by Feeding America, a large not-for-profit, is the subject of this essay. In 2005, Feeding America transitioned from the centralized allocation process, where they would make decisions based on their perception of food bank need, to one where local affiliates would bid for food items through an online auction mechanism. To do so, Feeding America constructed a specialized constructed currency called “shares” that are used to bid on loads of donated food. The process by which this change came about, its necessary idiosyncrasies, and its outcomes are described. By most objective measures, the change has been a huge success: the wide variation of food bank’s demand for food is now represented in their allocations, and there was a large and immediate increase in supply of 100 million pounds of food. ∗University of Chicago Booth School of Business. Email: canice.prendergast@chicagobooth.edu. I am grateful to Carole Theus, Harry Davis, Mike Halligan, Melanie Nowacki and Bill Thomas for much help on this. Many thanks to Paul Kim for excellent research assistance. Thanks also to Eric Budish, Scott Kominers, and Bob Topel for helpful comments and to seminar participants at the AMMA, NBER, MIT, and Rice University. Most of all, however, none of this could have been written without the other members of the America’s Second Harvest Allocation Task Force: John Alford, John Arnold, Al Brislain, Bill Clark, Phil Fraser, Maria Hough, Mike Halligan, Brenda Kirk, Rob Johnson, Susannah Morgan, Steve Sellent, Roger Simon, Harry Davis, Don Eisenstein, and Robert Hamada.

This paper demonstrates that mall store contracts are written to internalize externalities through both an efficient allocation and pricing of space, and an efficient allocation of incentives across stores. Certain stores generate externalities by drawing customers to other stores, whereas many stores primarily benefit from external mall traffic. Therefore, to varying degrees, the success of each store depends upon the presence and effort of other stores, and the effort of the developer to attract customers to the mall. Using a unique data set of mall tenant contracts, we show that rental contracts are written to (i) efficiently price the net externality of each store and (ii) align the incentives to induce optimal effort by the developer and each mall store according to the externality of each store's effort. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

This paper is concerned with the effect of nonmonetary incentives on behavior, in particular with the study of social pressure as a determinant of corruption. We offer empirical evidence that shows how professional soccer referees favor home teams in order to satisfy the crowds in the stadium. Referees have discretion over the addition of extra time at the end of a soccer game to compensate for lost time due to unusual stoppages. We find that referees systematically favor home teams by shortening close games where the home team is ahead, and lengthening close games where the home team is behind. They show no such bias for games that are not close. We further find that when the rewards for winning games increase, referees change their bias accordingly. Lastly, we identify that the mechanism through which bias operates is to satisfy the crowd, by documenting how the size and composition of the crowd affect referee favoritism. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Bureaucracies tend to be used when consumers cannot be trusted to choose outcomes efficiently. But a primary means of bureaucratic oversight is consumer complaints. But this can give bureaucrats an incentive to inefficiently accede to consumer demands to avoid a complaint. I show that when this incentive is important, bureaucracies (efficiently) respond by (i) ignoring legitimate consumer complaints, (ii) monitoring more in situations in which it is not needed, (iii) delaying decision making "too long," and (iv) biasing oversight against consumers. I also show that bureaucracies are used only when consumers cannot be trusted. As a result, observed bureaucracies are always inefficient.

Empirical work testing for a trade‐off between risk and incentives has had, at best, mixed success. This article provides two simple reasons, associated with subjectivity of performance appraisals, why we might not expect to see any negative relationship. Both reasons relate to empirically observed problems associated with monitoring: (i) supervisors sometimes bias their evaluations based on their personal feelings toward their subordinates, and (ii) supervisors will sometimes offer evaluations that reduce their costs. These aspects of monitoring are ignored in the standard model and can reverse the usual negative trade‐off between risk and incentives.

Consumers solve many agency problems, by pointing out when they believe that agents have made mistakes. I consider the role that consumers play in inducing efficient behaviour by agents. I distinguish cases where consumers have similar preferences to the principal, from those where they diverge. In the former case, allowing consumer feedback improves allocations, and increasing consumer information is unambiguously beneficial. Where consumers disagree with principals over desired outcomes, which characterises many public sector benefits, consumers' feedback about the performance of agents can reduce welfare. This may result in efficiently restricting the ability of consumers to complain about agent performance.

Empirical work testing for a negative tradeoff between risk and incentives, a cornerstone of agency theory, has not had much success. Indeed, the data seem to suggest a positive relationship between measures of uncertainty and incentives, rather than the posited negative tradeoff. I argue that the existing literature fails to account for an important effect of uncertainty on incentives through the allocation of responsibility to employees. When workers operate in certain settings, the activities that they should engage in are well known, and firms are content to assign tasks to workers and monitor their inputs. By contrast, when the situation is more uncertain, firms know less about how workers should be spending their time. As a result, the delegate responsibility to workers but, to constraint heir discretion, base compensation on observed output. Hence, uncertainty and output-based pay are positively related. I argue that parts of the existing empirical literature are better explained through this lens than with the standard model.

This paper addresses the prevalence of non-monetary gifts over more highly valued and e$cient monetary transfers in social relationships. We demonstrate that under a wide variety of circumstances, ine$cient non-monetary gifts will be o!ered by a donor in lieu of cash in order to signal the donor's quality of information about the recipient's preferences. This result emerges because gift giving is ine$cient relative to cash, and not because of any arbitrary assumptions regarding communication. In particular, the donor has available the strategy of o!ering cash and saying what he would have purchased. Nonetheless, there is still an important equilibrium role for buying gifts. 2001 Elsevier Science B.V. All rights reserved. JEL classixcation: A13; D10; D64; D82; Z1

I NCENTIVES ARE the essence of economics. Despite many wide-ranging claims about their supposed importance, there has been little empirical assessment of incentive provision for workers. The purpose of this paper is to critically overview existing work on the provision of incentives. Since the interests of workers and their employers are not always aligned, a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm's interest. This literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers. These include piece rates, options, discretionary bonuses, promotions, profit sharing, efficiency wages, deferred compensation, and so on. My objective here is to evaluate this literature in the light of a growing empirical literature on compensation. Where possible, I will address the literature from two perspectives. First, an underlying assumption of this literature is that individuals respond to contracts that reward performance. Accordingly, I consider whether agents behave in this way, and whether these responses are always in the firm's interest. Second, I address whether firms write contracts with these responses in mind. In other words, do contracts look like the predictions of the theory? Incentives are provided to workers

This paper examines individual decision making when decisions reflect on people's ability to learn. The authors address this problem in the context of a manager making investment decisions on a project over time. They show that, in an effort to appear as a fast learner, the manager will exaggerate his own information but ultimately he becomes too conservative, being unwilling to change his investments on the basis of new information. The authors' results arise purely from learning about competence rather than concavity or convexity of the rewards functions. They relate their results to the existing psychology literature concerning cognitive dissonance reduction. Copyright 1996 by University of Chicago Press.

Workers routinely carry out activities that increase their productivity with their current employer for which they are not directly compensated. For example, a worker may be asked to develop relationships with clients or shop floor staff, or he may develop a better understanding of how his firm operates. Firmspecific human capital of this type is difficult to quantify so that it is likely to be difficult to directly compensate the worker for its acquisition. This paper is concerned with designing compensation schemes for employees to induce them to collect nonverifiable firm-specific human capital. If firms develop reputations for fairly compensating workers for skill collection, the vagueness of these skills may not provide a significant incentive problem. I consider the case where firms do not have the opportunity to develop reputations. As a result, the acquisition of human capital is subject to a dual moral hazard problem, first noted in Kahn and Huberman [1988]. First, a worker only collects skills if there is a promise of a higher wage if he does so. Second, the employer has an incentive to claim that the worker has not collected these skills even when he in fact has, in order to save on wage costs. So, on the one hand, it is difficult to repay the worker after skills are collected as the firm has an incentive to renege. However, the worker cannot be repaid before collecting skills as he has no subsequent incentive to collect them. Following the institutional literature, I assume that the firm can commit to a labor contract which attaches wages to different tasks. The principal purpose of the paper is to show that the firm can use this ability to commit to a wage scale for different tasks to induce a worker to collect firm-specific human capital in the presence of this dual moral hazard problem, where the worker is rewarded for skill acquisition by promotion to another job. Assume that a worker can be assigned to one of two jobs, D and

Most of the economics literature on compensation and organizations builds from the theory of agency.’ For the most part, the literature analyzes situations in which agents’ performance can be controlled by tying compensation to objective performance measures such as output or sales. It ignores the fact that most compensation arrangements involve superiors’ subjectire. and hence non-contractible. judgements about employee performance. In our view, much of what is interesting about actual employment relations follows from the observation that ‘performance appraisal is a process by which humans judge other humans’ [Milkovich and Wigdor (1991)]. This paper studies the implications of subjective performance evaluation for compensation policies and for the efficiency of employment relations. Our objectives are two fold. First. we propose the importance of subjectivity of evaluations to better understand organizatlonal practices such as politicking, favoritism. and compression of wage scales. Second, we hope to orient the study of subjective performance evaluation in ways that are consistent with empirical evidence on what organizations actually do.

The focus of the paper is the effect of merger proposals on the expected profitability of the bidder and the target. We illustrate how an unsuccessful bid may increase the profitability of the target but reduce the profitability of the bidding firm, relative to the profitability of the firms before the merger offer. The profitability of a merger proposal is lowered due to learning from rejection. We use our theoretical model to explain empirical work on this issue. THEORETICAL WORK on the profitability of takeovers has rarely focused on the problem of unsuccessful merger proposals or tender offers.' This is unfortunate because the decision that is generally available to a firm is not whether it should merge with another firm, but, rather, whether it makes a merger proposal or tender offer. In this paper, we contend that failure to take account of this may bias estimates of the profitability of takeover attempts. The focus of the paper is the effect of merger proposals on the expected profitability of the bidding firm and the target firm. We describe a theoretical model to show how an unsuccessful bid may increase the profitability of the target but reduce the profitability of the bidding firm, relative to the profitability of the firms before the merger offer. This is independent of any effect of potential future takeovers on the value of the firm. Consequently, the profitability of a merger proposal will be lower than in the absence of any effect conditional on rejection. The assumption causing this result is that a target firm has private information about its profitability which is not available to the bidding firm. Assume that there is uncertainty about the profitability of the target and that the bidder offers x dollars for the target. The target accepts if its profits from not being merged are less than x and is rejected otherwise. Hence the response of the target to a merger proposal reveals information on the competitiveness or profitability of the target. We further assume that the two firms (the bidder and target) compete in a duopolistic market and play a Cournot game in quantities if a merger does not occur. (Therefore, we are restricting attention to horizontal mergers.) In the equilibrium of our model, bidding firms that suffer rejection of their *We would like to thank Peter Cramton, Norman Ireland, Alvin Klevorick and James Mirrlees and two anonymous referees for helpful comments. 'This is true for e.g. Salant, Switzer and Reynolds [1983], Davidson and Denekere [1983], Perry and Porter [1985], and Grossman and Hart [1980].

This paper is concerned with how firms provide workers with incentives to collect firm specific human capital when the skills collected cannot be contracted upon and where the worker is repaid for collecting skills by promotion. I consider two scenarios: (i) where the firm has private information on the worker's promotion prospects, and (ii) where there is symmetric uncertainty about the worker's promotion prospects. I show that the resolution to this incentive problem results in models of career development similar to those seen in Japan and the United States. I also discuss how differences in production methods and the role of an external labor market may help to explain observed differences in career development in Japan and the United States.

Many people belong to groups which partially identify their characteristics. This paper argues that when agents are risk averse, and where only group characteristics are visible rather than individual characteristics, the Pareto optimal construction of groups differs in systematic ways from standard notions of how groups should be formed. Two applications are considered: the assignment of workers to jobs, where it is shown the optimal contract does not involve maximizing output and accident insurance, where the optimal contract does not involve complete insurance. Many people belong to groups which serve to partially identify otherwise hidden talents or characteristics. For example, it is possible to find out that certain authors have written an article but their individual contributions are much more difficult to ascertain. Similarly, it may be easy to determine that a worker is a foreman, but much more difficult to tell how much better he is than other foremen. Or that somebody is employed, which tells us something about his talents, but not whether he is more talented than the average employed person. Each of these examples illustrates cases where we can see the "group" to which an agent belongs (author, foreman, employed) rather than an individual's characteristics. Standard notions of efficiency tell us how these groups should be formed. Academics should write papers together only if their joint product is greater than if they operated separately. A worker should be employer as a foreman only if his productivity is higher as a foreman than elsewhere in the organization, and so on. The principal result of this paper is that when agents are risk averse, and where only groups of the type above are visible to some agents rather than individual characteristics, these assignment rules may not be Pareto optimal. Instead, for example, someone who is less competent as a foreman than as an operative may still be employed as a foreman and this yields higher welfare than employing that worker as an operative. Let me explain the intuition by a simple example. Assume that workers who join a firm are uncertain of their ability. They are risk averse and seek insurance over that uncertainty. Untalented workers should be fired on standard efficiency grounds as they have higher productivity elsewhere. Assume that after a period of production, information on ability becomes available to the employer and the employee but that other employers must infer this information from whether the

Employees in public agencies rarely have pay for performance: instead their incentives are often guided by a sense of professionalism. This paper concerns how organizations should monitor professionals. The primary outcome of the paper is that weak incentives lead public agencies to exhibit bias in their oversight, by rewarding the interests of their employees to the detriment of other constituencies’ concerns. In some instances, this bias is complete by entirely ignoring other interests.

This paper demonstrates that mall store contracts are written to internalize externalities through both an efficient allocation and pricing of space, and an efficient allocation of incentives across stores. Certain stores generate externalities by drawing customers to other stores, while many stores primarily benefit from external mall traffic. Therefore, to varying degrees, the success of each store depends upon the presence and effort of other stores, and the effort of the developer to attract customers to the mall. Using a unique data set of mall tenant contracts, we show that rental contracts are written to: (i) efficiently price the net externality of each store, and (ii) align the incentives to induce optimal effort by the developer and each mall store according to the externality of each store's effort.

I offer theoretical and empirical observations on the oversight of public sector employees. I argue that it is unreasonable to expect that the solutions typically considered in the literature will be effective with public sector employees, because bureaucrats are especially difficult to monitor. To offset this weakness, agencies tend to hire bureaucrats who are biased against consumers, where such bias increases incentives. I then address how bureaucrats should be overseen and offer a choice between internal monitoring of public agencies, with overseers who are biased against consumers, or external monitoring, where bureaucrats become excessively worried about the prospect of an investigation and may change their behavior to attain that goal. I provide evidence from the Los Angeles Police Department to show that officers appear to have responded to increased oversight by reducing crime-fighting activities in an attempt to avoid investigation.

This paper provides empirical evidence of favoritism by agents, where that favoritism is generated by social pressure. To do so, we explore the behavior of professional soccer referees. Referees have discretion over the addition of extra time at the end of a soccer game (called injury time), to compensate for lost time due to unusual stoppages. We test for systematic bias shown by Spanish referees in favor of home teams. We show that referees systematically favor home teams by shortening close games where the home team is ahead, and lengthening close games where the home team is behind. They show no such bias for games that are not close. We further show that when the rewards for winning games increase, referees change their bias accordingly. We also identify that the mechanism through which bias operates is the referees' desire to satisfy the crowd, by documenting how the size and composition of the crowd affect referee favoritism.

We address the role of monetizing trades in an environment when reciprocal trade acts as the alternative means of exchange and opportunism is possible. We illustrate that money has three roles: (i) money enable trade on contractible goods, (ii) money aids trade in non-contractible goods through the use of voluntary transfers, and (iii) money possibly induces inefficient pricing and production decisions. We show a number of cases where allowing trades to be monetized reduces welfare and also illustrate how an inefficient instantaneous means of exchange can sometimes increase trade more than pure money. Finally, analogous to the role of barter in facilitating efficient exchange, we illustrate that otherwise classically inefficient restrictions on trading may have a similar desirable effect.

This paper explores the private and social benefits from barter exchange in a monetized economy. We first prove a no-trade theorem regarding the ability of firms with double-coincidences-of-wants to negotiate improvements in trade among themselves relative to the market outcomes. We then demonstrate that in the presence of liquidity shocks, introducing a non-monetary exchange avoids this limitation and enhances trade by (1) generating liquidity and (2) by segmenting the market place into low-demand and high-demand customers in a manner which is impossible with pure monetary exchange. We provide comparative statics illustrating the importance of each effect and relevant extensions.

with the compensation policies of firms. This literature is considered from the perspective of three major theories: human capital, learning, and incentives. Considerable empirical work has addressed each of these theories with some success. However, our understanding of the effect of compensation on behavior and of the motivations for firms in choosing certain policies has been constrained by two important problems. First, the absence of data on contracts and performance has limited the ability of researchers to ask even the most basic question, Do Incentives Matter? Second, the available theoretical work has not been sufficiently orientated towards distinguishing between plausible alternatives, so that many observed facts are consistent with any of the major theories.

This paper considers why non-monetary means of exchange, such as barter and the reciprocation of favors, are chosen by firms despite the usual benefits of monetary transactions. We consider the chosen means of exchange when both monetary and non-monetary exchange mechanisms are available. We illustrate three potential reasons for the emergence of non-monetary trade. First, a willingness to barter may reveal information that cannot be revealed solely through monetary trade. Second, non-monetary trade may constrain the ability of agents to engage in inefficient rent-seeking activities. Finally, non-monetary trade improves the ability of agents to impose trade sanctions on those who act dishonestly. We consider a number of applications of each of these ideas.

Objective measures of employee performance are rarely available. Instead, firms rely on subjective judgments by supervisors. Subjectivity opens the door to favoritism, where evaluators act on personal preferences toward subordinates to favor some employees over others. Firms must balance the costs of favoritism-arbitrary rewards and less productive job assignments-against supervisors' demands for authority over subordinates. We analyze the conditions under which favoritism is costly to organizations and the effects of favoritism on compensation, the optimal extent of authority, and the use of bureaucratic rules. Economists rarely address the fact that firms are social institutions, where personal relations among coworkers, bosses, and subordinates constitute an important component of many workers' daily lives. This paper takes a step toward addressing organizations as social entities by considering how favoritism by superiors, based on personal preferences toward subordinates, affects compensation and the structure of organizations. The underlying premise of the paper is that accurate and objective measures of a worker's performance are typically unavailable. Instead performance is gauged from subjective opinions