Incentive provision and coordination as market functions

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 09.06.2010, 12:15 - 13:30


Presentation by 

John E. Roemer (Yale University)


The market has both a coordination function and an incentive function. The first theorem of welfare economics is all about coordination; the principalagent model is all about incentives. What is the relative importance of the market in carrying out these two functions? While there has been a shift in economic theory in the past thirty years from emphasizing the coordination role to emphasizing the incentive role, it is not clear whether this reflects a new and deeper understanding of the market. Understanding the marketís functions, in real economies, may be key for understanding the degree to which redistribution in them is feasible.

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