Relative Performance or Team Evaluation? Optimal Contracts for Other-Regarding Agents
نویسنده
چکیده
This paper derives optimal incentive contracts for agents with other-regarding preferences. It offers a behavioral explanation for the empirically observed lack of relative performance evaluation. We analyze a principal-multi agent model and assume that agents are inequity averse or status seeking. We show that team contracts can be optimal even if the agents’ performance measures are positively correlated such that relative performance evaluation would be optimal with purely self-interested agents and even though relative performance evaluation provides additional incentives to provide effort if agents have other-regarding preferences. Furthermore, optimal incentive contracts for other-regarding agents can be low-powered as compared to contracts for purely self-interested agents. DOI: https://doi.org/10.1016/j.jebo.2011.01.029 Posted at the Zurich Open Repository and Archive, University of Zurich ZORA URL: https://doi.org/10.5167/uzh-51097 Originally published at: Bartling, Björn (2011). Relative performance or team evaluation? Optimal contracts for other-regarding agents. Journal of Economic Behavior Organization, 79(3):183-193. DOI: https://doi.org/10.1016/j.jebo.2011.01.029 Relative Performance or Team Evaluation? Optimal Contracts for Other-Regarding Agents Björn Bartling University of Zurich∗ November 25, 2010
منابع مشابه
Collusion and Discrimination in Organizations: Comment
Ishiguro(2004) shows that discriminatory wage schemes are optimal among collusion-proof contracts under relative performance evaluation when agents collude. However, that analysis depends on the assumption that the agents cannot observe their performances. We investigate how optimal contracts should be modified when the agents observe the realized firm value. We show that the optimal collusion-...
متن کاملCollusion and discrimination in organizations
In a principal–multi-agent setting we investigate how optimal contracts should be modified under relative performance evaluation when agents collude. Agents may write side-contracts, which are not contingent on their effort choices but indirectly control them through sidetransfers. We show that the optimal collusion-proof contract is to introduce a ‘‘discriminatory policy’’ in the sense that th...
متن کاملIncentives for Research Agents: Optimal Contracts and Implementation
We study the agency problem between a firm and its research employees. In a multi-agent contracting setting, we show explicitly the way in which the optimal incentive regime is a function of how agents’ efforts interact with one another: relative-performance evaluation is used when their efforts are substitutes whereas joint-performance evaluation is used when their efforts are complements. We ...
متن کاملPerformance pay and dynamic social preferences
This paper analyzes implications of dynamic social preferences in a simple multiagent moral hazardmodel. The basic assumption is that social (other-regarding) preferences, such as shame and compassion, is a function of previously offered incentive schemes. I show that it may be optimal to offer incentives based on relative performance evaluation (RPE) in both periods in the dynamic (two-period)...
متن کاملDelegated Portfolio Management, No Churning, and Relative Performance-based Incentive/sorting Schemes
of the research reported in this paper was carried out. My discussions with Robert Gary-Bobo were very helpful in clarifying some ideas. I retain sole responsibility for all remaining errors. 2 ABSTRACT We show that optimal delegated portfolio management contracts-which serve to screen out uninformed agents and reward potentially informed agents sufficiently to compensate their opportunity and/...
متن کامل