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A new reform in the Soviet economy makes the size of the bonus fund depend on the plan target as well as the degree to which it has been fulfilled.By instituting this change, Soviet planners hope to stimulate more ambitious plans.The present paper develops a theoretical analysis of this novel and interesting approach to economic planning.in consultation with the enterprise.Now they are selected by the enterprise according to the multi-stage procedure just outlined.In order for the new system to have the proper incentive effects, a, 8, and y must be set so that < a < 8 < Y.(o This conclusion has not escaped the attention of Soviet planners and the standards in Ekonomicheskaya Gazeta specify that y shall be at least 30% greater and a at least 30% less than 8.
Martin L. Weitzman (1976) studied this question.