IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-20-01131.html

Performance measure aggregation – two action levels

Author

Listed:
  • Junwook Yoo

    (Sungkyunkwan University)

  • Igor Semenenko

    (Acadia University)

Abstract

In practice, effort is often measured in two levels due to the simplicity. When employees' actions are restricted to two levels, this study shows that the basic measures can be aggregated into a one-dimensional sufficient aggregate without losing any information from the basic measures. The format of the one-dimensional sufficient aggregate is determined only by the statistical properties of the basic measures and the one-dimensional sufficient aggregate can be uniformly used regardless of organizational particulars. By using the one-dimensional sufficient aggregate, complexity of performance evaluation systems can be reduced and efficiency of motivating employees through performance evaluation can be substantially improved.

Suggested Citation

  • Junwook Yoo & Igor Semenenko, 2021. "Performance measure aggregation – two action levels," Economics Bulletin, AccessEcon, vol. 41(2), pages 564-572.
    • Handle: RePEc:ebl:ecbull:eb-20-01131
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2021/Volume41/EB-21-V41-I2-P50.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rogerson, William P, 1985. "The First-Order Approach to Principal-Agent Problems," Econometrica, Econometric Society, vol. 53(6), pages 1357-1367, November.
    2. Florin Şabac & Junwook Yoo, 2018. "Performance Measure Aggregation in Multi‐Task Agencies," Contemporary Accounting Research, John Wiley & Sons, vol. 35(2), pages 716-733, June.
    3. Amin H. Amershi & John S. Hughes, 1989. "Multiple Signals, Statistical Sufficiency, and Pareto Orderings of Best Agency Contracts," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 102-112, Spring.
    4. Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring.
    5. Grossman, Sanford J & Hart, Oliver D, 1983. "An Analysis of the Principal-Agent Problem," Econometrica, Econometric Society, vol. 51(1), pages 7-45, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martin Byford, 2003. "Moral Hazard From Costless Hidden Actions," Working Papers 2003.03, School of Economics, La Trobe University.
    2. Nahum D. Melumad, 1989. "Asymmetric information and the termination of contracts in agencies," Contemporary Accounting Research, John Wiley & Sons, vol. 5(2), pages 733-753, March.
    3. Ghossoub, Mario, 2010. "Supplement to "Belief heterogeneity in the Arrow-Borch-Raviv insurance model"," MPRA Paper 37717, University Library of Munich, Germany, revised 22 Mar 2012.
    4. Kevin Gross & Carl T Bergstrom, 2024. "Rationalizing risk aversion in science: Why incentives to work hard clash with incentives to take risks," PLOS Biology, Public Library of Science, vol. 22(8), pages 1-15, August.
    5. Chade, Hector & Swinkels, Jeroen, 2020. "The moral hazard problem with high stakes," Journal of Economic Theory, Elsevier, vol. 187(C).
    6. Jokivuolle, Esa & Keppo, Jussi, 2014. "Bankers' compensation: Sprint swimming in short bonus pools?," Bank of Finland Research Discussion Papers 2/2014, Bank of Finland.
    7. René Kirkegaard, 2020. "Microfounded Contest Design," Working Papers 2003, University of Guelph, Department of Economics and Finance.
    8. repec:bof:bofrdp:urn:nbn:fi:bof-201503041096 is not listed on IDEAS
    9. Mensch, Jeffrey, 2021. "Rational inattention and the monotone likelihood ratio property," Journal of Economic Theory, Elsevier, vol. 196(C).
    10. Dirk Yandell, 1988. "Audit Information and Incentives for Efficiency," The American Economist, Sage Publications, vol. 32(1), pages 49-58, March.
    11. Florian Hoffmann & Roman Inderst & Marcus Opp, 2021. "Only Time Will Tell: A Theory of Deferred Compensation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(3), pages 1253-1278.
    12. Jokivuolle, Esa & Keppo, Jussi & Yuan, Xuchuan, 2015. "Bonus caps, deferrals and bankers' risk-taking," Bank of Finland Research Discussion Papers 5/2015, Bank of Finland.
    13. Bartsch, Elga, 1996. "Enforcement of environmental liability in the case of uncertain causality and asymmetric information," Kiel Working Papers 755, Kiel Institute for the World Economy.
    14. Steven A. Matthews, 1991. "Renegotiation of Sales Contracts under Moral Hazard," Discussion Papers 950, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    15. Georges Dionne & Scott Harrington, 2017. "Insurance and Insurance Markets," Working Papers 17-2, HEC Montreal, Canada Research Chair in Risk Management.
    16. Junwook Yoo, 2023. "Aggregate and disaggregate performance measurements: Inter‐temporally correlated performance measures with limited commitment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(5), pages 2626-2642, July.
    17. Jokivuolle, Esa & Keppo, Jussi, 2014. "Bankers' compensation: : Sprint swimming in short bonus pools?," Research Discussion Papers 2/2014, Bank of Finland.
    18. Budde, Jörg, 2009. "Information in tournaments under limited liability," Journal of Mathematical Economics, Elsevier, vol. 45(1-2), pages 59-72, January.
    19. Jean‐Jacques Laffont, 1988. "Hidden Gaming in Hierarchies: Facts and Models," The Economic Record, The Economic Society of Australia, vol. 64(4), pages 295-306, December.
    20. Alex Edmans & Xavier Gabaix, 2016. "Executive Compensation: A Modern Primer," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1232-1287, December.
    21. Kim, Son Ku & Wang, Susheng, 1998. "Linear Contracts and the Double Moral-Hazard," Journal of Economic Theory, Elsevier, vol. 82(2), pages 342-378, October.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-20-01131. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.