IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/27855.html
   My bibliography  Save this paper

Renegotiation and Relative Performance Evaluation: Why an Informative Signal may be Useless

Author

Listed:
  • Yim, Andrew

Abstract

Although Holmstrom’s informativeness criterion provides a theoretical foundation for the controllability principle and interfirm relative performance evaluation, empirical and field studies provide only weak evidence on such practices. This paper refines the traditional informativeness criterion by abandoning the conventional full-commitment assumption. With the possibility of renegotiation, a signal’s usefulness in incentive contracting depends on its information quality, not simply on whether the signal is informative. This paper derives conditions for determining when a signal is useless and when it is useful. In particular, these conditions will be met when the signal’s information quality is either sufficiently poor or sufficiently rich. (JEL C72, D82).

Suggested Citation

  • Yim, Andrew, 2000. "Renegotiation and Relative Performance Evaluation: Why an Informative Signal may be Useless," MPRA Paper 27855, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:27855
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/27855/1/MPRA_paper_27855.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jewitt, Ian, 1988. "Justifying the First-Order Approach to Principal-Agent Problems," Econometrica, Econometric Society, vol. 56(5), pages 1177-1190, September.
    2. Takayama,Akira, 1985. "Mathematical Economics," Cambridge Books, Cambridge University Press, number 9780521314985.
    3. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
    4. repec:bla:joares:v:35:y:1997:i:2:p:273-278 is not listed on IDEAS
    5. repec:bla:joares:v:37:y:1999:i::p:187-214 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    informativeness; monitoring; renegotiation; principal-agent model;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

    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:pra:mprapa:27855. 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: (Joachim Winter) or (Rebekah McClure). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.