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Workers in an important category of jobs select tasks autonomously. We study the tradeoff between monetary bonuses and non-monetary prizes as tools for guiding their choices. An optimal incentive scheme prioritizes workers for prizes in return for taking on underserved tasks, and this...
Persistent link: https://www.econbiz.de/10014359170
Standard principal-agent theory predicts that large firms should not use employee stock options and other stock-based compensation to provide incentives to non-executive employees. Yet, business practitioners appear to believe that stock-based compensation improves incentives, and mounting...
Persistent link: https://www.econbiz.de/10010362951
I study when a firm prefers to be transparent about pay using a simple multidimensional signalling model. Pay transparency within the firm means that a worker can learn about their own productivity from another worker's pay. This can either encourage or discourage workers—which affects...
Persistent link: https://www.econbiz.de/10012851374
I study when a firm prefers to be transparent about pay using a simple multidimensional signaling model. Pay transparency within the firm means that a worker can learn about his own worker-firm match from another worker's pay. This can either encourage or discourage workers-which affects...
Persistent link: https://www.econbiz.de/10014479181
This paper examines multi-period compensation contracts when retirement is anticipated. Short-term contracts in long-term employment relationships are equivalent to a long-term renegotiation-proof contract. The dynamic of incentive rates is determined by (i) how and in which periods managerial...
Persistent link: https://www.econbiz.de/10014038792
This study adopts behavioral contract theory through a mathematical model and clarifies the situation in which a fixed–salary contract is preferable to incentives–based one for the principal. Theoretically, the expected utility for the principal is higher under an incentives–based contract...
Persistent link: https://www.econbiz.de/10013296794
This paper examines the optimal compensation scheme, job design, and severance policy for a team using a model of repeated moral hazard. In the optimal contract, the agent may be paid to quit after a poor performance. We show that a generous severance policy facilitates the adoption of team...
Persistent link: https://www.econbiz.de/10012967589
I study the implications of agency frictions for the pricing policy of institutional market makers. In a setting where a market maker cannot observe the actions of an employed trader, I derive the optimal compensation structure and pricing policy. The theory demonstrates that incentive...
Persistent link: https://www.econbiz.de/10013027079
We examine a general equilibrium dynamic economy in which each firm i) hires a manager who can divert cash flows and ii) can fire him after poor performance, generating costs to both parties.The contract is terminated when the manager's continuation value reaches his compensation at another firm...
Persistent link: https://www.econbiz.de/10013223925
We explore when and how to reward failure in a dynamic principal-agent relationship with experimentation. The agent receives flow rents from experimentation, and divides his time between searching for evidence of success and failure about the underlying project. The principal commits in advance...
Persistent link: https://www.econbiz.de/10012897496