Good news and bad news in subjective performance evaluation

Budde, Jörg (September 2013): Good news and bad news in subjective performance evaluation. SFB/TR 15 Discussion Paper No. 444

Abstract

Earlier studies show that contracts under subjective performance evaluation are dichotomous and punish only worst performance. I show that with limited liability payments need not be binary. More importantly, if the agent earns a rent from limited liability, the optimal contract distinguishes only signals of good news and bad news of the agent’s action.

• Item Type: Paper
• Keywords: bonus, monotone likelihood ratio, wage compression
• 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
• JEL Classification: D82, M52, M54
• Language: English