When designing incentives for a manager, the trade-off between insurance and a "good" allocation of effort across various tasks is often identified with a trade-off between the responsiveness (sensitivity, precision, signal-noise ratio) of the performance measure and its similarity (congruity,...

When designing incentives for a manager, the trade-off between insurance and a "good" allocation of effort across various tasks is often identified with a trade-off between the responsiveness (sensitivity, precision, signal-noise ratio) of the performance measure and its similarity (congruity,...

This paper studies how firms can efficiently incentivize supervisors to truthfully report employee performance. To this end, I develop a dynamic principal-supervisor-agent model. The supervisor is either selfish or altruistic towards the agent, which is observable to the agent but not to the...

When designing incentives for a manager, the trade-off between insurance and a "good" allocation of effort across various tasks is often identified with a trade-off between the responsiveness (sensitivity, precision, signal-noise ratio) of the performance measure and its similarity (congruity,...

Supervisory monitoring and monetary incentives are often used concurrently to mitigate agency conflicts. When an agent has to exert different types of effort for multi-dimensional tasks, little evidence exists on the interaction effect on an agent’s performance when both control mechanisms are...

Why does incentive pay often depend on subjective rather than objective performance evaluations? After all, subjective evaluations entail a credibility issue. While the most plausible explanation for this practice is lack of adequate objective measures, I argue that subjective evaluations might...

We study optimal incentive contracts with multiple agents when performance evaluation is delegated to a reviewer. The reviewer may be biased in favor of the agents, but the degree of bias is unknown to the principal. We show that a contest, which is a contract in which the principal determines a...

We study optimal incentive contracts with multiple agents when performance evaluation is delegated to a reviewer. The reviewer may be biased in favor of the agents, but the degree of the bias is unknown to the principal. We show that a contest, which is a contract in which the principal...

Employer learning about workers' abilities plays a key role in determining how workers sort into jobs and are compensated. This study explores whether learning is symmetric or asymmetric, i.e., whether potential employers have the same information about worker ability as the incumbent firm. I...

This paper discusses some issues of compensation policy in business and academia from the perspectives of incentive theory, other theories, and empirical research. The main conclusion is that mechanical rules for performance-related pay are likely to be inferior to more subjective performance...