Performance Comparisons and Dynamic Incentives
It is well known that comparative performance information (CPI) can enhance efficiency in static principal-agent relationships by improving the trade-off between insurance and incentives in the design of explicit contracts. In dynamic settings, however, there may be implicit as well as explicit incentives (e.g. managerial career concerns and the ratchet effect in regulation). We show that the dynamic effects of CPI on implicit incentives can either reinforce or oppose the familiar (static) insurance effect and can in either case be the dominant factor affecting efficiency. The overall welfare effects of CPI are thus ambiguous and can be characterized in terms of the underlying information structure.
|Date of creation:||Jan 1995|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:1107. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.