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Relative Performance Evaluation and Limited Liability

Bhaskar, V (2002) Relative Performance Evaluation and Limited Liability. Working Paper. University of Essex, Department of Economics, Economics Discussion Papers, Colchester.


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We analyze the role of relative performance evaluation when a principal has several agents, who face correlated shocks. If limited liability constraints are binding, relative performance evaluation may be of no value if the principal is restricted to symmetric contracts. However, with asymmetric contracts, where agents are induced to choose different effort levels, relative performance measures can be used in order to reduce informational rents. Relative performance evaluation is a way of reducing the rents of the high effort agent, who will in general be worse off than the low effort agent.

Item Type: Monograph (Working Paper)
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Users 161 not found.
Date Deposited: 28 Aug 2014 14:53
Last Modified: 28 Aug 2014 14:53

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