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Subjective evaluations : discretionary bonuses and feedback credibility

Fuchs, William - 2013

We provide a new rationale for the use of discretionary bonuses. In a setting with unknown match qualities between a worker and a firm and subjective evaluations by the principal, bonuses are useful in order to make the feedback from the firm to the workers credible. This way workers in good...

Persistent link: https://www.econbiz.de/10010221557

Strategic incomplete contracts : theory and experiments

Erkal, Nisvan; Wu, Steven Y.; Roe, Brian - 2014

We develop a model of strategic contractual incompleteness that identifies conditions under which principals might omit even costlessly verifiable terms. We then use experiments to test comparative statics predictions of the model. While it is well known that verifiability imperfections can...

Persistent link: https://www.econbiz.de/10010457849

Dynamic incentive contracts under parameter uncertainty

Prat, Julien; Jovanovic, Boyan - 2010

We analyze a long-term contracting problem involving common uncertainty about a parameter capturing the productivity of the relationship, and featuring a hidden action for the agent. We develop an approach that works for any utility function when the parameter and noise are normally distributed...

Persistent link: https://www.econbiz.de/10009303458

Dynamic contracts and learning by doing

Prat, Julien - 2014

This paper studies the design of optimal contracts in dynamic environments where agents learn by doing. We derive a condition under which contracts are fully incentive compatible. A closed-form solution is obtained when agents have CARA utility. It shows that human capital accumulation...

Persistent link: https://www.econbiz.de/10010246654

Testing canonical tournament theory : on the impact of risk, social preferences and utility structure

Sheremeta, Roman M.; Wu, Steven Y. - 2012

We use experiments to test comparative statics predictions of canonical tournament theory. Both the roles of principal and agent are populated by human subjects, allowing us to test predictions for both incentive responses and optimal tournament design. Consistent with theory, we observed an...

Persistent link: https://www.econbiz.de/10009530179

How successful are banking sector reforms in emerging market economies? : evidence from impact of monetary policy on levels and structures of firm debt in India

Bhaumik, Sumon Kumar; Kutan, Ali Mustafa; Majumdar, Sudipa - 2016

that well-functioning credit markets would reflect a bank channel for monetary policy at work, we test whether a change in … and the associated change in interest rate does not affect change in bank credit, change in total debt and the proportion … of bank credit in total debt for any of the firms. We discuss the policy implications of the findings. …

Persistent link: https://www.econbiz.de/10011493763

Self-confidence and reactions to subjective performance evaluations

Bellemare, Charles; Sebald, Alexander - 2019

Subjective performance evaluations are commonly used to provide feedback and incentives to workers. However, such evaluations can generate significant disagreements and conflicts, the severity of which may be driven by many factors. In this paper we show that a workers' level of self-confidence...

Persistent link: https://www.econbiz.de/10011992961

Hidden insurance in a moral hazard economy

Bertola, Giuseppe; Koeniger, Winfried - 2013

We consider an economy where individuals privately choose effort and trade competitively priced securities that pay off with effort-determined probability. We show that if insurance against a negative shock is sufficiently incomplete, then standard functional form restrictions ensure that...

Persistent link: https://www.econbiz.de/10010225898

Negative externalities and equilibrium existence in competitive markets with adverse selection

Siemens, Ferdinand von; Kosfeld, Michael - 2009

Rothschild and Stiglitz (1976) show that there need not exist a competitive equilibrium in markets with adverse selection. Building on their framework we demonstrate that externalities between agents - an agent's utility upon accepting a contract depends on the average type attracted by the...

Persistent link: https://www.econbiz.de/10003831629

Search and retirement under asymmetric information

Bi, Sheng; Langot, François - 2014

We consider a labor market where the competitive search equilibrium is inefficient due to asymmetrical information. At the time when firms commit to specific hiring costs, workers hold private information on their intention of entering into retirement before the termination of the contract. When...

Persistent link: https://www.econbiz.de/10010379224

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