Alexander Koch and Eloic Peyrache (2005) Aligning Ambition and Incentives.
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In many economic situations several principals contract with the same agents sequentially. Asymmetric learning about agents’ abilities provides the first principal with an informational advantage and has profound implications for the design of incentive contracts. We show that the principal always strategically distorts information revelation to future principals about the ability of her agents. The second main result is that she can limit her search for optimal incentive schemes to the class of relative performance contracts that cannot be replicated by contracts based on individual performance only. This provides a new rationale for the optimality of such compensation schemes.
This is a Accepted version This version's date is: 2005 This item is not peer reviewed
https://repository.royalholloway.ac.uk/items/e6f6bbf3-60fb-0e97-eb4f-9fa6341b477d/1/
Deposited by Leanne Workman (UXYL007) on 12-Oct-2012 in Royal Holloway Research Online.Last modified on 12-Oct-2012
©2005 Alexander K. Koch and Eloic Peyrache. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit including © notice, is given to the source