Decentralization, Incentive Contracts and the Effect of Distortions in Performance Measures

Tigran Melkonyan ()

Manchester School, 2014, vol. 82, issue 6, 631-652

Abstract: A model endogenizing authority over decisions and incentive contracts is developed. In addition to motivating the agent to exert effort, the principal is concerned about some non-contractible decision that is chosen simultaneously with the agent's effort. The choice of this decision affects both the performance measure and the principal's objective. We consider two allocations of authority to make this decision; principal and agent authority. The choice of authority structure affects the incentive contract, which together with authority structure, affects the agent's effort. We determine the optimal authority structure and incentive contract and how they are affected by different factors.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1111/manc.12031 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:manchs:v:82:y:2014:i:6:p:631-652

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1463-6786

Access Statistics for this article

Manchester School is currently edited by Keith Blackburn

More articles in Manchester School from University of Manchester Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().