Incentives and Organizations

Course content

Why do firms and other types of organizations exist? Which factors determine whether they succeed in achieving efficient levels of cooperation and coordination amongst their members?


How does individual behavior and organizational performance depend on compensation and incentive structures, the allocation of tasks or responsibilities within an organization? How do coworker relationships, employees’ work morale, and the perceived fairness of one’s pay influence workplace behavior? How does the organization of public institutions affect their efficiency and the implementation of public policy?


During the past decades, research in economics has made great progress in answering such questions by opening the “black box” of what happens within firms and other organizations. In this course, students will be introduced to the key theoretical concepts and empirical approaches that help understand the existence, design, and performance of organizations. The main part of the course will focus on the question how economic methods can be used to understand the relationship between incentives, organizational structure, and the performance of organizations. In particular, we will discuss (i) how incentives shape individual motivation and behavior, and (ii) how incentives as well as other organizational features (e.g., hierarchies, teams, authority, and delegation) affect collective behavior and organizational performance.

Learning outcome

After completing the course the student is expected to be able to:



  • Account for central theoretical insights and state-of-the-art empirical research in organizational economics.
  • Account for how economic theory, “insider econometrics”, lab and field experiments, and other complementary empirical methods can be used to address applied microeconomic questions.



  • Interpret and critically assess theoretical and empirical studies on incentive provision and behavior in organizations.

  • Put the results of these studies into perspective and identify limitations of the existing body of knowledge.



  • Apply the acquired knowledge and skills to practical questions related to incentive provision in organizations.

  • Manage and implement the learned tools and accuired knowledge to continue working on related topics in seminars, Master courses or Master’s theses.

The format of the course is a combination of lectures and individual student work. During the weekly lectures core concepts, theories, and empirical results will be discussed. Every other week, there will be an exercise session, in which students work on their own (individually or in groups) and review questions and/or research papers of direct relevance for the syllabus and the exam.

The course will be based on lecture notes, research papers, and survey articles. Lecture notes are part of the mandatory readings. A detailed syllabus with required readings will be provided in the beginning of the course.

The following handbook chapters give an overview of research results in the field and provide an introduction of the theoretical concepts and main empirical approaches that will be used in class:

  • Gibbons, R. and J. Roberts (2013): “Economic Theories of Incentives in Organizations”, In Gibbons and Roberts (eds): Handbook of Organizational Economics, Princeton University Press.
  • Ichinowski, C. and K. Shaw (2013): “Insider Econometrics”. In Gibbons and Roberts (eds): Handbook of Organizational Economics, Princeton University Press.
  • Kuhn, P. and G. Charness (2011): “Lab Labor: What Can Labor Economists Learn from the Lab?”. In Ashenfelter and Card (eds): Handbook of Labor Economics, Volume 4 Part A. Amsterdam: North-Holland.
  • List, J. and I. Rasul (2011): “Field Experiments in Labor Economics”. In Ashenfelter and Card (eds): Handbook of Labor Economics, Volume 4 Part A. Amsterdam: North-Holland.

A sound knowledge of microeconomic theory as well as a sound understanding of econometric techniques from the BA in Economics or similar are required.

It is highly recommended that Microeconomics III has been followed prior to "Incentives and Organizations" or will be followed in parallel with the course.

BSc in Economics or similar

2 hours lectures 1 to 2 times a week from week 36 to 50 (except week 42).

The overall schema for the Master can be seen at KUnet:
MSc in Economics => "Courses and teaching" => "Planning and overview" => "Your timetable"

Timetable and venue:
To see the time and location of lectures please press the link under "Se skema" (See schedule) at the right side of this page. E means Autumn.

You can find the similar information partly in English at
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-F20; [Name of course]””
-Select Report Type: “List – Weekdays”
-Select Period: “Forår/Spring – Weeks 4-30”
Press: “ View Timetable”



The lecturer will give oral and written feedback during the exercise sessions on the students individual/group work.

7,5 ECTS
Type of assessment
Written assignment, 3 hours
The exam assignment is given in English and must be answered in English.

The Board of Study has decided to change the exam to an online take-home exam, due to the Corona-crisis. The exam is still individual and you may not communicate with others about the exam assignment or solutions in any circumstances.

With aids


Marking scale
7-point grading scale
Censorship form
No external censorship
for the written exam. The exam may be chosen for external censorship by random check.
Criteria for exam assessment

Students are assessed on the extent to which they master the learning outcome for the course.


To receive the top grade, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.

Single subject courses (day)

  • Category
  • Hours
  • Exam
  • 3
  • Preparation
  • 161
  • Lectures
  • 42
  • English
  • 206