In this study, we examine two adjudication methods designed to resolve disputes between principals and agents concerning bonus payments in relationships characterized by moral hazard and where the parties have been forced to use soft, imprecise, and subjective information to align incentives....

SFB 649 Discussion Paper 2006-053 Governance: Who Controls Matters Bruno Deffains* Dominique Demougin** * University of Nancy 2 and CNRS, France ** School of Business and Economics, Humboldt-Universität zu Berlin, Germany This research was supported by the...

Assuming a liquidity constrained agent, we characterize the optimal implicit contract in a repeated game characterized by moral hazard. With longer expected contract duration, bonus pay is shown to decrease while salary promise and productivity increase. We test our model using personnel data of...

The current study integrates the repeated game approach to implicit contracts and the analysis of explicit bonus rules based on subjective performance evaluation to determine the optimal structure of the compensation scheme for the average white- collar employee. In contrast to previous...