Contracting in Firms
This article provides an overview of recent advances in theoretical and empirical work on incentive contracting in firms. The specific focus is on a variety of reasons why the prediction of the early literature on contracting –suggesting a strong relationship between performance and pay – has not been borne out.
KeywordsAgency theory Contracting in firms Externalities Free rider problem Incentive contracts Input monitoring Measurement error Multitasking Performance-related pay Principal and agent Private information Risk
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