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Optimal contracts for lenient supervisors
TU Berlin, Germany.ORCID iD: 0000-0002-8973-1410
University of Cologne, Germany.
2012 (English)In: Journal of Economic Behavior and Organization, ISSN 0167-2681, E-ISSN 1879-1751, Vol. 81, no 2, p. 403-420Article in journal (Refereed) Published
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Abstract [en]

We analyze optimal contracts in a hierarchy consisting of a principal, a supervisor and an agent. The supervisor is either neutral or altruistic towards the agent, but his preferences are private information. In a model with two supervisor types, we find that the optimal contract may be very simple, paying the supervisor a flat wage independent of his type and his evaluation of the agent's effort. Such a contract induces the neutral type of supervisor to report the agent's performance truthfully, while the altruistic type reports favorably independent of performance. Accordingly, overstated performance (leniency bias) may be the outcome of an optimal contract under informational asymmetries.

Place, publisher, year, edition, pages
Elsevier, 2012. Vol. 81, no 2, p. 403-420
Keywords [en]
Subjective performance evaluation, Leniency, Supervisor, Private information
National Category
Economics
Research subject
Economy, Economics
Identifiers
URN: urn:nbn:se:lnu:diva-49428DOI: 10.1016/j.jebo.2011.11.003OAI: oai:DiVA.org:lnu-49428DiVA, id: diva2:898851
Available from: 2016-01-29 Created: 2016-01-29 Last updated: 2017-11-30Bibliographically approved

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Giebe, Thomas

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