Relative performance evaluation in a multi-plant firm

Arbeitspapier

We analyze optimal compensation schedules for the directors of two plants belonging to the same owner and producing the same good but serving geographically differentiated markets. Since the outcome of each director depends on his own effort and on a random variable representing market conditions, the problem takes the form of a principal multi-agent model. We first provide appropriate extensions of the MLR and CDF conditions that ensure the validity of the first-order approach in the single agent case. Then, we show that affiliation of the random variables is a necessary and sufficient condition for the compensation of one director to negatively and monotonically depend on the performance of the other.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 1420

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Organizational Behavior; Transaction Costs; Property Rights
• Subject: principal-agent problems ; relative performance evaluation ; first-order approach ; monotone likelihood ratio ; affiliation ; Leistungsorientierte Vergütung ; Führungskräfte ; Agency Theory ; Organschaft ; Mathematische Optimierung ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Luporini, Annalisa
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/18784
• Last update: 10.03.2025, 11:44 AM CET