Mortal Managers and Long-Term Goals: An Impossibility Result

Carlos Alberto Mello-e-Souza

RAND Journal of Economics, 1993, vol. 24, issue 3, 313-327

Abstract: This article examines decision myopia under effort and risk neutrality. An infinite, non-overlapping sequence of mortal managers is selected and their performance evaluated. Contracts admit premature termination. Plant condition depends on maintenance, which induces an interstage linkage in production. When ability and action are imprecisely known by employers, no contract achieves the first-best outcome. Furthermore, if the manager discounts less than the owners, inefficiency is partially due to moral hazard, which resembles myopia. Optimal contracts infer ability and motivate behavior via manipulation of wage schedules and tenure guidelines.

Date: 1993
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://links.jstor.org/sici?sici=0741-6261%2819932 ... O%3B2-9&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

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:rje:randje:v:24:y:1993:i:autumn:p:313-327

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in RAND Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().