The central idea in the chapter is that some productive inputs are not acquired in perfect markets, are not necessarily delivered in the quality and quantity intended.

In turn, this creates an interest in controis of some sort, controis designed to address frictions inherent in the trade of labor for compensation. The stylized model of personally costly input highlights the use of output in the control apparatus. How, in this model, is output used to facilitate the purchase of input? Why is the supplier paid for performance?

AppendixLO1