Overstatement and rational market expectation
When an agent overstates his/her true performance, a rational market can still correctly guess the true performance. This paper shows, however, that such rational market expectation and a profit-maximizing principal can exacerbate the lack of productive effort by the agent.
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- Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
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"Optimal Contracts under Costly State Falsification,"
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- Lacker, J.M., 1989. "Optimal Contracts Under Costly State Falsification," Purdue University Economics Working Papers 956, Purdue University, Department of Economics.
- Moran, John & Morgan, John, 2003. "Employee recruiting and the Lake Wobegon effect," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 165-182, February.
- Stein, Jeremy C, 1989. "Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 655-69, November.
- Illoong Kwon & Katherine Guthrie & Jan Sokolowsky, 2008. "On the Objective of Corporate Boards: Theory and Evidence," Discussion Papers 08-08, University at Albany, SUNY, Department of Economics.
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