In this paper, the authors examine the problem of inducing a manager to acquire information that is useful in determining his optimal job assignment but which might also adversel y affect his market value. The authors show that spot contracts are optimal and generate the first-best effort level when the manager is risk-neutral. When the manager is risk-averse, the optimal contract consists either of a partial insurance contract against downward revisions in compensation or a competitive spot contract, depending upon the nature of prior information. Copyright 1993 by The London School of Economics and Political Science.
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Article provided by London School of Economics and Political Science in its journal Economica.
Volume (Year): 60 (1993) Issue (Month): 237 (February) Pages: 13-26 Download reference. The following formats are available: HTML
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