according to Köszegi and Rabin (2006, 2007). The optimal contract is a binary payment scheme even for a rich performance measure …. Moreover, for diminutive occurrence probabilities for all signals the agent is rewarded with the fixed bonus if his performance …

We consider a principal-agent model with moral hazard where the agent’s knowledge about the performance measure is … a subset of all informative performance measures. That is, the Informativeness Principle does not hold in our model …

employee’s performance was poor. The justification assures the employee that the manager has not distorted the evaluation … downwards. For good performance, however, the manager pays a constant high wage without justification. The empirical literature … demonstrates that subjective evaluations are lenient and discriminate poorly between good performance levels. This pattern was …