A principal can observe both the output and input of an agent who works at a job involving multiple tasks. We provide a simple theory that explains why it may be optimal for the principal to use only an output-based incentive contract, even though the principal can monitor the agent's actions perfectly in all but one task and knows exactly which action is optimal for each task. (JEL D82, D86, M54)
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Volume (Year): 98 (2008)
Issue (Month): 4 (September)
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References listed on IDEAS
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- Chen, Bo, 2012. "All-or-nothing payments," Journal of Mathematical Economics, Elsevier, vol. 48(3), pages 133-142.
- Guy Kaplanski & Haim Levy, 2012. "Executive Short-Term Incentive, Risk-Taking And Leverage-Neutral Incentive Scheme," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-45.