Good news and bad news in subjective performance evaluation
Earlier studies show that contracts under subjective performance evaluation are dichotomous and punish only worst performance. I show that with limited liability payments need not be binary. More importantly, if the agent earns a rent from limited liability, the optimal contract distinguishes only signals of good news and bad news of the agentâ€™s action.
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- Paul R. Milgrom, 1979.
"Good Nevs and Bad News: Representation Theorems and Applications,"
407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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- Sanford Grossman & Oliver Hart, .
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Rodney L. White Center for Financial Research Working Papers
15-80, Wharton School Rodney L. White Center for Financial Research.
- Rogerson, William P, 1985. "The First-Order Approach to Principal-Agent Problems," Econometrica, Econometric Society, vol. 53(6), pages 1357-67, November.
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