AbstractThis paper is concerned with models of the use of performance incentives in the Soviet Union and United States. The principal analytical result is an extension of an analysis of the methods whereby Soviet planners make the decision about production targets a variable under control of the producer, who is the only one possessing a knowledge of the uncertain condition of production. It is shown that this device can be viewed as a classical inventory problem. There is also an examination of the “U.S. incentive program” referring to multi‐incentive contracts in which the profits received by the private producers are related to performance, outcome and cost. The analysis describes how this device can be extended to solve the target output selection problem of the Soviet planning s