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Aggregate and disaggregate performance measurements: Inter‐temporally correlated performance measures with limited commitment

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  • Junwook Yoo

Abstract

This study employs the LEN model in analyzing aggregations and disaggregate use of inter‐temporally correlated performance measures in two‐period agencies with limited commitment. The optimal disaggregate use where an agent's incentive is on basic measures suffers information loss to depend on agency particulars. Induced action is restricted by the subsequent period action, and limited commitment leads to fostering late optimal effort inducement. Performance measure aggregation yields inaccurate inter‐temporal information relative to the disaggregate use and leads to raising early optimal effort inducement. Both the total informativeness and the difference in informativeness of performance measures fortify early optimal effort inducement.

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  • 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.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:5:p:2626-2642
    DOI: 10.1002/mde.3838
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