When Is It Foolish to Reward for A While Benefiting from B?
AbstractA performance measure may or may not reflect the relative importance of different tasks for the production of benefit: it can be aligned or unaligned. Here, I examine when using an aligned measure generates a larger surplus in a principal-agent relationship than using an unaligned but otherwise identical measure. I find that (i) the agent's effort costs matter for the optimal way of measuring performance, and (ii) the optimal measure is not aligned but tilted toward tasks that the agent finds easy. Failing to recognize these insights may lead to false predictions about the use of incentives. (c) 2008 by The University of Chicago.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Labor Economics.
Volume (Year): 26 (2008)
Issue (Month): 4 (October)
Contact details of provider:
Web page: http://www.journals.uchicago.edu/JOLE/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Jenny Kragl & Anja Schöttner, 2012. "Wage Floors, Imperfect Performance Measures, and Optimal Job Design," Working Paper Series of the Department of Economics, University of Konstanz 2012-36, Department of Economics, University of Konstanz.
- Grout, Paul & Schnedler, Wendelin, 2008.
"Non-Profit Organizations in a Bureaucratic Environment,"
Sonderforschungsbereich 504 Publications
08-17, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
- Paul A. Grout & Wendelin Schnedler, 2008. "Non-Profit Organizations in a Bureaucratic Environment," The Centre for Market and Public Organisation 08/202, Department of Economics, University of Bristol, UK.
- Paul Grout & Wendelin Schnedler, 2008. "Non-Profit Organizations in a Bureaucratic Environment," Working Papers 0474, University of Heidelberg, Department of Economics, revised Sep 2008.
- Grout, Paul & Schnedler, Wendelin, 2008. "Non-Profit Organizations in a Bureaucratic Environment," IZA Discussion Papers 3685, Institute for the Study of Labor (IZA).
- Dietrichson, Jens, 2013. "Coordination Incentives, Performance Measurement and Resource Allocation in Public Sector Organizations," Working Papers 2013:26, Lund University, Department of Economics.
- Thiele, Veikko, 2010. "Task-specific abilities in multi-task principal-agent relationships," Labour Economics, Elsevier, vol. 17(4), pages 690-698, August.
- Kragl, Jenny & Schöttner, Anja, 2011. "Wage Floors and Optimal Job Design," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48731, Verein für Socialpolitik / German Economic Association.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division).
If references are entirely missing, you can add them using this form.