The history of reverse mortgages is substantially more interesting than many would think. While reverse mortgages have only become popular in the past 15 years, these loans have actually been around for decades. Contrary to what naysayers often say about these loans, reverse mortgage history is teeming with generosity, financial innovation, and positive advancement. The […]

Before tapping into one’s home equity, seniors should carefully consider both the pros and cons of a reverse mortgage. While these loans benefit many borrowers, it is important for seniors to consider all of their different options. To help determine whether a reverse mortgage might be in a consumer’s best interest, potential borrowers can review […]

The appraisal of individual employees is almost inevitably dysfunctional. Organizational performance is improved through refinements to the overall system or process of production, which must be the focus of attention. According to this line of thought, individual performance appraisals typically divert attention from more important tasks; they focus people\’s attention on alleviating symptoms of poor […]

If you’ve worked in insurance for a while, you may have thought about striking out as an independent insurance broker. With the right experience and backing, there’s no reason not to do this, but you should not underestimate the challenges. Insurance brokers act as an intermediary between insurers – the big firms – and clients, […]

It would seem that allowing groups autonomously to form and break up as necessary would be nearly ideal: People would choose to be with their friends, and this would promote the efficacy of social sanctions, increase the likelihood of a cooperatively collusive equilibrium being reached, and encourage the group\’s welfare by individual members. But things […]

Incentive schemes are sometimes constructed in which rewards to the individual depend on achieving certain hurdle levels of performance. That is, compensation depends discontinuous on the achievement of some numerical goal. For example, a salesman bonus may depend on whether he surpasses some level of sales, and/or his average commission percentage may jump discontinuous as […]

Economic analysis of group incentive schemes begins with the free-rider problem: The individual member of the group bears fully the personal costs of her efforts but shares the gains from those efforts, in terms of improved performance and hence increased compensation, with members of the group. If she behaves selfishly and trades off only her […]

The basic agency model contends that incentives lack power and efficiency when the employee has little control over the measures on which his compensation is based, or alternatively when the employee can control certain measures of performance but those measures give a noisy indication of the value-adding efforts provided by the employee. If a division […]

An optimal scheme is one that gives the employer the highest expected profit net of compensation paid, subject to the constraint that the employee must be given compensation package attractive enough to get him to accept the job. 1 – The optimal compensation scheme for the employee will typically involve him getting more compensation the […]

Agency theory, the principal – agent model, and the economic theory of incentives are three names for the same thing: a collection of models created by economists to answer this question. We discuss the basic model in this subsection and elaborations following that. The basic model begins with the supposition that the connection between time […]