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Performance Measurement Technologies and the Trade-off of Risk and Incentives

Author

Listed:
  • Oliver Gurtler

    (Department of Economics, University of Bonn, Germany)

Abstract

This paper analyzes a principal's decision of when to invest in a performance measurement technology. Interestingly, higher risk may make such an investment less likely. In this case, the strength of incentives certainly decreases. If, however, an increase in risk induces an initially non-investing principal to invest, incentive strength may increase.

Suggested Citation

  • Oliver Gurtler, 2007. "Performance Measurement Technologies and the Trade-off of Risk and Incentives," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 6(1), pages 1-10, April.
  • Handle: RePEc:ijb:journl:v:6:y:2007:i:1:p:1-10
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    References listed on IDEAS

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    1. Itoh, Hideshi, 1994. "Job design, delegation and cooperation: A principal-agent analysis," European Economic Review, Elsevier, vol. 38(3-4), pages 691-700, April.
    2. Canice Prendergast, 2002. "The Tenuous Trade-off between Risk and Incentives," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1071-1102, October.
    3. Itoh, Hideshi, 2001. "Job design and incentives in hierarchies with team production," Hitotsubashi Journal of commerce and management, Hitotsubashi University, vol. 36(1), pages 1-17, January.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Pu Chen & Sanxi Li & Jianye Yan & Xundong Yin, 2016. "Moral hazard in innovation: the relationship between risk aversion and performance pay," Journal of Economics, Springer, pages 77-89.

    More about this item

    Keywords

    complements; risk; incentive strength; performance measurement system;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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