The use of non-verifialble information regarding the agent's action in compensation contracts
MetadataShow full item record
Subjective, non-verifiable information (such as satisfaction rating) is often used to supplement objective, verifiable information (such as financial numbers) in contracting. Empirical research finds that non-verifiable information can be used in contracting as a subjective performance measure or as subjective weighting on an objective performance measure. The differences between the two options have not yet been thoroughly explored analytically. This paper considers a multi-task setting where the non-verifiable performance signal provides incremental information about an aspect of the agent’s action. The research finds that when the agent has unlimited liability, both contracting schemes deliver the same payoff to the principal. However, the principal may strictly prefer a subjective weighting scheme in a setting where the agent has limited liability.
Showing items related by title, author, creator and subject.
Trust and reputation for service-oriented environments: Technologies for building business intelligence and consumer confidenceChang, Elizabeth; Dillon, Tharam S.; Hussain, Farookh (2006)Trust has played a central role in human relationships and hence has been the subject of study in many fields including business, law, social science, philosophy and psychology. It has played a pivotal role in forming ...
Jackson, Elizabeth Louise (2008)Australian wool traders and researchers have little knowledge of the incomplete adoption of the price risk management strategies that are available to stabilise wool producers’ incomes. Auction is by far the most popular ...
Rahman, Noorashikin Abdul (2003)This thesis examines the complex power structures that underscore the migration and employment of Indonesian women as foreign domestic workers (FDWs) in Singapore. The main objective is to highlight the power of individual ...