We analyze the optimal combination of promotion tournaments and linear individual performance pay in an employment relationship. An agent's effort is non-observable and he has private information about his suitability for promotion. Thus, the two incentive schemes need to be combined to serve...

We develop an equilibrium model where risk-averse agents can choose between employment and entrepreneurship. An important property of our framework is that the effort of agents is not observable (moral hazard), so that optimal employment contracts must be incentive compatible. In equilibrium we...

It has been argued in the multitask agency literature that effort distortion can be mitigated by applying several performance measures in incentive contracts. This paper analyzes the efficient aggregation of multiple performance measures aimed at motivating non-distorted effort. It demonstrates...

This paper examines how employees trade off planned activities versus unplanned innovation, and how firms can choose incentives to affect these choices. It develops a multi-task model where employees makes choices between their assigned standard tasks, for which the firm has a performance...

This paper analyzes a multi-task agency framework where the agent exhibits task-specific abilities. It illustrates how incentive contracts account for the agent's task-specific abilities if contractible performance measures do not reflect the agent's multidimensional contribution to firm value....

Many scholars have emphasized the importance of subjective performance evaluations in employment relationships to provide employees with appropriate effort incentives. While the previous literature has focused on subjective evaluations conducted directly by the firm owner (principal), we...