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A simple moral hazard model is developed in order to analyse the impact of different types of performance pay on productivity. Participants on the course will analyse relevant empirical research and consider the possibility that incentives could have a negative impact on productivity. The potential impact of extrinsic rewards on intrinsic motivation will be assessed as well as the properties of a good performance measure. The impact of performance measures in the public and private sector will be considered in a number of case studies.