Journal ArticleDOI
Moral Hazard in Teams
TLDR
In this article, the authors study moral hazard with many agents and focus on two features that are novel in a multiagent setting: free riding and competition, and show that competition among agents (due to relative evaluations) has merit solely as a device to extract information optimally.Abstract:
This article studies moral hazard with many agents. The focus is on two features that are novel in a multiagent setting: free riding and competition. The free-rider problem implies a new role for the principal: administering incentive schemes that do not balance the budget. This new role is essential for controlling incentives and suggests that firms in which ownership and labor are partly separated will have an advantage over partnerships in which output is distributed among agents. A new characterization of informative (hence valuable) monitoring is derived and applied to analyze the value of relative performance evaluation. It is shown that competition among agents (due to relative evaluations) has merit solely as a device to extract information optimally. Competition per se is worthless. The role of aggregate measures in relative performance evaluation is also explored, and the implications for investment rules are discussed.read more
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Journal ArticleDOI
How Does Product Market Competition Shape Incentive Contracts
Vicente Cuñat,Maria Guadalupe +1 more
TL;DR: In this article, the effect of product market competition on the explicit compensation packages that firms offer to their CEOs, executives and workers was studied and a large sample of both traded and nontraded UK firms was used to exploit a quasi-natural experiment associated to an increase in competition.
Journal ArticleDOI
Empirical evidence on the implicit determinants of compensation in Big 4 audit partnerships
TL;DR: In this paper, the implicit financial incentives of individual Big 4 audit partners by examining the association between a partner's compensation and characteristics of the audit firm, audit partner, and individual partner clientele for Big 4 firms in Sweden were investigated.
Journal ArticleDOI
Management by Results: Student Evaluation of Faculty Teaching and the Mis-Measurement of Performance.
TL;DR: This paper found that actual grades have a significant, positive effect on student evaluations of teaching (SETs), controlling for expected grade and fixed effects for both faculty and courses, and for possible endogeneity.
Journal ArticleDOI
The Qualities of Leadership: Direction, Communication, and Obfuscation
Torun Dewan,David P. Myatt +1 more
TL;DR: A leader's influence, measured by the weight placed on her speech, increases with her judgement on policy (sense of direction) and her ability to convey ideas (clarity of communication) as discussed by the authors.
Journal ArticleDOI
The impact of public opinion on board structure changes, director career progression, and CEO turnover: evidence from CalPERS' corporate governance program
TL;DR: In this article, the California Public Employees' Retirement System (CalPERS) influences public opinion by publicly naming the companies having poor corporate governance, which damages the reputations of management and directors at these companies and these companies respond by improving their corporate governance.
References
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Posted Content
Production, information costs, and economic organization
Armen A. Alchian,Harold Demsetz +1 more
TL;DR: In this paper, the authors present a set of reprint articles for which IEEE does not hold copyright. Full text is not available on IEEE Xplore for these articles, but full text can be found on the Internet Archive.
Journal ArticleDOI
Moral Hazard and Observability
TL;DR: In this article, the role of imperfect information in a principal-agent relationship subject to moral hazard is considered, and a necessary and sufficient condition for imperfect information to improve on contracts based on the payoff alone is derived.
Posted Content
The Economic Theory of Agency: The Principal's Problem.
TL;DR: The canonical agency problem can be posed as follows as discussed by the authors : the agent may choose an act, aCA, a feasible action space, and the random payoff from this act, w(a, 0), will depend on the random state of nature O(EQ the state space set), unknown to the agent when a is chosen.
Journal ArticleDOI
Reexamination of the perfectness concept for equilibrium points in extensive games
TL;DR: The concept of perfect equilibrium point has been introduced in order to exclude the possibility that disequilibrium behavior is prescribed on unreached subgames [Selten 1965 and 1973]. Unfortunately this definition of perfectness does not remove all difficulties which may arise with respect to unreached parts of the game.
Journal ArticleDOI
Good News and Bad News: Representation Theorems and Applications
TL;DR: In this article, a notion of "favorableness" of news is introduced, characterized, and applied to four simple models: the arrival of good news about a firm's prospects always causes its share price to rise, more favorable evidence about an agent's effort leads the principal to pay a larger bonus, buyers expect that any product information withheld by a salesman is unfavorable to his product, and bidders figure that low bids by their competitors signal a low value for the object being sold.