Abstract
We analyze a two-period agency problem with limited liability and nonverifiable information. The principal commits to a dynamic bonus pool comprising a fixed total payment that may be distributed over time to the agent and a third party. We find that the optimal two-period contract features memory. If the agent succeeds in the first-period, second-period incentives are weakened whereas higher-powered incentives are provided if he fails. The two-period bonus pool offers a complementary reason for why third-party payments are not commonly observed in practice.
| Item Type: | Paper |
|---|---|
| Faculties: | Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > B4 - Die Gestaltung von Turnieren im Rahmen der Corporate Governance |
| Subjects: | 300 Social sciences > 330 Economics |
| URN: | urn:nbn:de:bvb:19-epub-17406-5 |
| Language: | English |
| Item ID: | 17406 |
| Date Deposited: | 31. Oct 2013 13:01 |
| Last Modified: | 04. Nov 2020 12:59 |
Actions (login required)
- View Item
