To address agents' moral hazard over effort, incentive contracts impose risk on the agents. As performance measures become noisier, the conventional agency analysis predicts that principals will reduce the incentive weights assigned to such measures. However, prior empirical results (Prendergast...

This study utilizes a national survey of physicians in the United States, administered four times between 1996 and 2005, to examine the use of non-financial performance measures in physician compensation contracts. Consistent with agency theory, we find that non-financial measures are used more...

We examine a principal-agent setting in which the principal uses a performance measurement system for multiple purposes to provide incentives and for retention decisions. The principal chooses the nature and extent of bias in the system, which determines whether the performance report is...

We extend Fisher, Peffer, and Sprinkle (2003) to investigate the effectiveness of a budget-based incentive contract to settings with alternate task characteristics. We first replicate their finding: when groups perform a task with an additive production function, a budget-based contract leads to...