{"title":"Shaping Incentives through Measurement and Contracts","authors":"Jonathan D. Bonham","doi":"10.2308/tar-2019-0248","DOIUrl":null,"url":null,"abstract":"<jats:title>ABSTRACT</jats:title> I study productive activity, measurement, and compensation in a principal agent model that relaxes common restrictions on the action set of the agent, the distribution of performance measures, and the shape of the wage schedule. The solution to this relaxed problem unifies insights from extant theory and shares features with well-known empirical phenomena. In particular, the optimal outcome distribution has a kink, optimal measurement is conservative, and optimal wages ensure congruent incentives and resemble accounting-based bonus plans featuring a floor, hurdle bonus, incentive zone, and ceiling, with thresholds that may reference other performance measures. Beyond these specific insights, the paper provides a flexible framework for studying how incentives are shaped through measurement and contracts.","PeriodicalId":22240,"journal":{"name":"The Accounting Review","volume":"295 1","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2024-01-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"The Accounting Review","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2308/tar-2019-0248","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
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Abstract
ABSTRACT I study productive activity, measurement, and compensation in a principal agent model that relaxes common restrictions on the action set of the agent, the distribution of performance measures, and the shape of the wage schedule. The solution to this relaxed problem unifies insights from extant theory and shares features with well-known empirical phenomena. In particular, the optimal outcome distribution has a kink, optimal measurement is conservative, and optimal wages ensure congruent incentives and resemble accounting-based bonus plans featuring a floor, hurdle bonus, incentive zone, and ceiling, with thresholds that may reference other performance measures. Beyond these specific insights, the paper provides a flexible framework for studying how incentives are shaped through measurement and contracts.
ABSTRACT I study productive activity, measurement, and compensation in a principal agent model that relaxes common restrictions on the action set of the agent, the distribution of performance measures, and the shape of the wage schedule.对这一放宽问题的解决统一了现有理论的见解，并与众所周知的经验现象有共同之处。特别是，最优结果分布具有扭结，最优衡量是保守的，最优工资确保了一致的激励，并类似于基于会计的奖金计划，具有最低限额、障碍奖金、激励区和最高限额，其临界点可参考其他绩效衡量标准。除了这些具体的见解之外，本文还提供了一个灵活的框架，用于研究激励机制是如何通过衡量和合同形成的。
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