Optimality of Intertemporal Aggregation in Dynamic Agency

Employee performance evaluations usually take place on an annual basis but quarterly, monthly, or weekly evaluations are by no means exceptional. If their outcomes determine variable pay, finding the optimal frequency of performance evaluations is far from a trivial task. This paper investigates the benefit of intertemporal aggregation of performance measures in a two-period agency with a non-stationary production technology and shows that infrequent evaluation can be efficient even if there is complementarity between tasks in different periods. When the principal cannot fully commit to a two-period contract, the benefit of aggregation is yet larger.

MoreLess

Year of publication:	2010
Authors:	Lukas, Christian
Publisher:	Universität Konstanz / Fachbereich Wirtschaftswissenschaften. Fachbereich Wirtschaftswissenschaften
Subject:	dynamic agency \| intertemporal aggregation \| performance measurement \| complementary tasks \| commitment

More details

Type of publication:	Article
Language:	English
Notes:	Publ. in: Journal of management accounting research 22 (2010), 1, pp. 157-174
Source:	BASE

Persistent link: https://ebvufind01.dmz1.zbw.eu/10009471626