This paper considers the profit maximization problem of a firm that must make sunk investments in long-lived assets to produce output. It is shown that if per period accounting income is calculated using a simple and natural allocation rule for investment called the relative replacement cost...

This paper considers a simple model where a firm must make sunk investments in long-lived assets in order to produce output, there are constant returns to scale within each period, and the replacement cost of assets is weakly falling over time. It is shown that, so long as demand is weakly...

This paper considers the profit maximization problem of a firm that must make sunk investments in long-lived assets to produce output. It is shown that if per period accounting income is calculated by using a particular allocation rule for investment called the relative benefit and replacement...

This paper provides a formal analysis of how managerial investment incentives are affected by alternative allocation rules when managerial compensation is based on accounting measure of income which include allocations for investment expenditures. The major result is that a unique allocation...

Under prospective pricing, payers for health care essentially use price regulation of hospitals as a way of indirectly regulating the provision of treatment intensity. This paper ppresents a theory of how a nonprofit hospital selects treatment intensities for its priducts given the payer's...

This paper descrives some of the insights that the economic theory of incentives can contribute to defense procurment policy analysis. It descrives the underlying incentive problems that shape the defense procurement problem, the nature of current institutions and how they affect actors'...