The efficiency of bonus-or-terminate incentive schemes under subjective evaluations

Lucas Maestri

Games and Economic Behavior, 2014, vol. 87, issue C, 412-418

Abstract: We study a repeated principal–agent model with subjective evaluations. We construct simple bonus-or-terminate incentive schemes. In these schemes, the principal evaluates the agent every T periods. The principal pays a bonus and asks the agent to work for T more periods if the evaluation is positive. The relationship is terminated if the evaluation is negative. The inefficiencies in these schemes vanish as the agent can be more frequently evaluated. This result holds generally under objective or subjective evaluations.

Keywords: Principal–agent model; Subjective evaluations (search for similar items in EconPapers)
JEL-codes: C73 D82 E24 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:87:y:2014:i:c:p:412-418

DOI: 10.1016/j.geb.2014.05.015

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