Accession Number : ADA131638
Title : Planning Under Incomplete Information and the Ratchet Effect.
Descriptive Note : Technical rept.,
Corporate Author : STANFORD UNIV CA CENTER FOR RESEARCH ON ORGANIZATIONAL EFFICIENCY
Personal Author(s) : Freixas,Xavier ; Guesnerie,Roger ; Tirole,Jean
PDF Url : ADA131638
Report Date : Jun 1983
Pagination or Media Count : 62
Abstract : Central Planning of production is usually performed under asymmetric information. The firm in general has more information about its productive possibilities than the Central Planner (from now on for short CP). This justifies the use of incentives schemes in which the CP does not directly fix activity levels. Casual observation of such existing schemes suggests that the time dimensions is crucial for their working. Typically the CP revises the incentive scheme over time to take into account the information provided by the firm's performance. Managers of centrally planned economies as well as economists have long recognized that this revision induces firms to underproduce in order to avoid demanding schemes in the future. This is the ratchet effect. It is purpose of the present paper to study the ratchet effect under the non-commitment assumption, which we believe to be more realistic, The inadequacy of conceptual tools made if difficult in the past to consider such an assumption. Now basic research on dynamic games with incomplete information recently resulted in new ideas which look particularly relevant for a theoretical analysis of the problem.
Descriptors : *Game theory, *Production control, Mathematical models, Econometrics, Economic analysis, Planning programming budgeting, Information exchange, Dynamic programming
Subject Categories : Administration and Management
Economics and Cost Analysis
Distribution Statement : APPROVED FOR PUBLIC RELEASE