Between 1950 and 2000, the four-firm producer-concentration ratio for beer increased from 22 to 95 in the United States; and Anheuser-Busch's share of domestic output ballooned from 6 to 54 percent. In Germany, concentration has risen, but it remains low. In 2000, the four-firm...

This article identifies some of the major issues that have been examined in the literature on incentives. The article begins by discussing the frictions that lie at the heart of incentive problems. Next, the principal's optimal response to these frictions is explored, taking as given the...