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for defective units identified during inspection or pays the unit price for good units. In the certification regime, the … supplier obtains vendor certification and the buyer pays the unit price for all units supplied. The inspection technology and … implements the supplier's high-quality and low-inspection. The supplier's expected profit is greater than his reservation profit …
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undetected. Key to our analysis is the condition of whether a buyer can commit to the intensity of supply inspection. If a buyer …, however, may become complements when a buyer is able to commit to the intensity of supply inspection. Complementarity is … provide broad support for theory, which, we argue, might help to explain variation in inspection practices across industries …
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Consider a principal-agent relationship in which more effort by the agent raises the likelihood of success. Does rewarding success, i.e., paying a bonus, increase effort in this case? I find that bonuses have not only an incentive but also an income effect. Overall, bonuses paid for success may...
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