It is often suggested that incentive schemes under moral hazard can be gamed by an agent with superior knowledge of the environment, and that deliberate lack of transparency about the incentive scheme can reduce gaming.  We formally investigate these arguments.  Ambiguous incentive schemes...

This paper argues that the prevalence of compensation systems which reward winners without explicitly identifying losers can be rationalized by workers` concern for relative payoffs. If the workers` participation constraints are binding, the firm must compensate its employees for the disutility...