Subjective performance evaluation is modeled as auditing without commitment. A superior, who has to decide whether an where to audit the work done by a subordinate, takes into account all interim information he has obtained in the meantime. This invites workers to cover up and withhold...

A firm can either subject its workers to strict rules and regulations or grant them independence. If independent, they can make entrenchment-investments which will not only raise their productivity but also make the firm depend on their cooperation. However, in contrast to a standard holdup...