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Relative Performance Evaluation between Multitask Agents

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  • Hitoshi Matsushiima

    (Faculty of Economics, University of Tokyo)

Abstract

We investigate the moral hazard problem in which the principal delegates multiple tasks to two agents. She imperfectly monitors the action choices by observing the public signals that are correlated through the macro shock and that satisfy conditional independence. When the number of tasks is sufficiently high, relative performance evaluation functions effectively for unique implementation, where the desirable action choices are supported by an approximate Nash equilibrium, and any approximate Nash equilibrium virtually induces the first-best allocation. Thus, this is an extremely effective method through which the principal divides the workers into two groups and makes them compete with each other.

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File URL: http://www.carf.e.u-tokyo.ac.jp/pdf/workingpaper/fseries/68.pdf
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Bibliographic Info

Paper provided by Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo in its series CARF F-Series with number CARF-F-067.

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Length: 28 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:cfi:fseres:cf067

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References

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  1. Hitoshi Matsushima & Koichi Miyazaki & Nobuyuki Yagi, 2010. "Role of Linking Mechanisms in Multitask Agency with Hidden Information," CARF F-Series CARF-F-209, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  2. Legros, Patrick & Matsushima, Hitoshi, 1991. "Efficiency in partnerships," Journal of Economic Theory, Elsevier, vol. 55(2), pages 296-322, December.
  3. Hitoshi Matsushima, 1998. "Multimarket Contact, Imperfect Monitoring, and Implicit Collusion," CIRJE F-Series CIRJE-F-24, CIRJE, Faculty of Economics, University of Tokyo.
  4. Laurent Franckx & Isabelle Brose & Alessio DAmato, 2004. "Multitask Rank Order Tournaments," Economics Bulletin, AccessEcon, vol. 10(10), pages 1-10.
  5. Ma, Ching-To, 1988. "Unique Implementation of Incentive Contracts with Many Agents," Review of Economic Studies, Wiley Blackwell, vol. 55(4), pages 555-72, October.
  6. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, December.
  7. Mookherjee, Dilip, 1984. "Optimal Incentive Schemes with Many Agents," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 433-46, July.
  8. repec:ebl:ecbull:v:10:y:2004:i:10:p:1-10 is not listed on IDEAS
  9. Hitoshi Matsushima, 2003. "Multi-Group Incentives," CIRJE F-Series CIRJE-F-201, CIRJE, Faculty of Economics, University of Tokyo.
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Cited by:
  1. Hitoshi Matsushima, 2010. "Role Of Relative And Absolute Performance Evaluations In Intergroup Competition," The Japanese Economic Review, Japanese Economic Association, vol. 61(4), pages 443-454, December.
  2. Alessio D’Amato & Laurent Franckx, 2010. "Nonpoint pollution regulation targeted on emission proxies: the role of yardstick schemes," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 12(4), pages 201-218, December.

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