Performance Measurement in Agency Models
Chang Koo Chi () and
Kyoung Jin Choi ()
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Kyoung Jin Choi: University of Calgary, https://sites.google.com/site/kyoungjinchoiecon/
No 5/2019, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics
This note explores how to evaluate an agent’s performance in standard incentive contracts. We show that the MPS criterion proposed by Kim (1995) becomes a tight condition for one performance measurement system to be more informative than another, as long as the first-order approach can be justified. In the one-signal case obeying the monotone likelihood ratio property, the MPS criterion is equivalent to the way of ordering signals developed by Lehmann (1988), establishing a link to statistical decision theory. Our results demonstrate that depending on the agent’s potential deviations, ideal performance measures can be different.
Keywords: Agency problems; performance measurement; informativeness criterion; signal orderings (search for similar items in EconPapers)
JEL-codes: D86 (search for similar items in EconPapers)
Pages: 22 pages
New Economics Papers: this item is included in nep-hrm and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:nhheco:2019_005
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