Aggregating Performance Measures in Multitask Principal-Agent Relationships
Aggregating Performance Measures in Multitask Principal-Agent Relationships

Author: Veikko Thiele

Publisher:

Published: 2010

Total Pages: 8

ISBN-13:

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It has been argued in the multitask agency literature that effort distortion can be mitigated by applying several performance measures in incentive contracts. This paper analyzes the efficient aggregation of multiple performance measures aimed at motivating non-distorted effort. It demonstrates that non-distorted effort can be induced by combining a sufficient quantity of informative performance measures. However, this is only optimal if the required aggregation concurrently maximizes the precision of the agent's performance evaluation. This paper further illustrates how the optimal performance evaluation is affected by individual agent's ability to perform relevant tasks.

The Economic Nature of the Firm
The Economic Nature of the Firm

Author: Randall S. Kroszner

Publisher: Cambridge University Press

Published: 2009-09-21

Total Pages: 664

ISBN-13: 1316025233

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This book brings together classic writings on the economic nature and organization of firms, including works by Ronald Coase, Oliver Williamson, and Michael Jensen and William Meckling, as well as more recent contributions by Paul Milgrom, Bengt Holmstrom, John Roberts, Oliver Hart, Luigi Zingales, and others. Part I explores the general theme of the firm's nature and place in the market economy; Part II addresses the question of which transactions are integrated under a firm's roof and what limits the growth of firms; Part III examines employer-employee relations and the motivation of labor; and Part IV studies the firm's organization from the standpoint of financing and the relationship between owners and managers. The volume also includes a consolidated bibliography of sources cited by these authors and an introductory essay by the editors that surveys the new institutional economics of the firm and issues raised in the anthology.

Task-Specific Abilities in Multi-Task Principal-Agent Relationships
Task-Specific Abilities in Multi-Task Principal-Agent Relationships

Author: Veikko Thiele

Publisher:

Published: 2010

Total Pages: 0

ISBN-13:

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This paper analyzes a multi-task agency framework where the agent exhibits task-specific abilities. It illustrates how incentive contracts account for the agent's task-specific abilities if contractible performance measures do not reflect the agent's multidimensional contribution to firm value. This paper further sheds light on potential ranking criteria for performance measures in multi-task principal-agent relationships. It demonstrates that performance measures in multi-task agencies cannot necessarily be compared by their respective signal-to-noise ratio as in single-task agency relationships. In fact, it is indispensable to take the induced effort distortion and the measure-cost efficiency into consideration - both determined by the agent's task-specific abilities.