Artikel
Optimal incentive contract with endogenous monitoring technology
Recent technology advances have enabled firms to flexibly process and analyze sophisticated employee performance data at a reduced and yet significant cost. We develop a theory of optimal incentive contracting where the monitoring technology that governs the above procedure is part of the designer's strategic planning. In otherwise standard principal-agent models with moral hazard, we allow the principal to partition agents' performance data into any finite categories and to pay for the amount of information the output signal carries. Through analysis of the trade-off between giving incentives to agents and saving the monitoring cost, we obtain characterizations of optimal monitoring technologies such as information aggregation, strict MLRP, likelihood ratio-convex performance classification, group evaluation in response to rising monitoring costs, and assessing multiple task performances according to agents' endogenous tendencies to shirk. We examine the implications of these results for workforce management and firms' internal organizations.
- Sprache
-
Englisch
- Erschienen in
-
Journal: Theoretical Economics ; ISSN: 1555-7561 ; Volume: 15 ; Year: 2020 ; Issue: 3 ; Pages: 1135-1173 ; New Haven, CT: The Econometric Society
- Klassifikation
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Wirtschaft
Economics of Contract: Theory
IT Management
- Thema
-
Incentive contract
endogenous monitoring technology
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Li, Anqi
Yang, Ming
- Ereignis
-
Veröffentlichung
- (wer)
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The Econometric Society
- (wo)
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New Haven, CT
- (wann)
-
2020
- DOI
-
doi:10.3982/TE3130
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Artikel
Beteiligte
- Li, Anqi
- Yang, Ming
- The Econometric Society
Entstanden
- 2020
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