Good news and bad news in subjective performance evaluation
AbstractEarlier studies show that contracts under subjective performance evaluation are dichotomous and punish only worst performance. I show that with limited liability payments need not be binary. More importantly, if the agent earns a rent from limited liability, the optimal contract distinguishes only signals of good news and bad news of the agentâ€™s action.
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Bibliographic InfoPaper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 444.
Date of creation: Sep 2013
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bonus; monotone likelihood ratio; wage compression;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
- M54 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Management
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-16 (All new papers)
- NEP-CTA-2013-11-16 (Contract Theory & Applications)
- NEP-HRM-2013-11-16 (Human Capital & Human Resource Management)
- NEP-MIC-2013-11-16 (Microeconomics)
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