Goal Setting in the Principal-Agent Model : Weak Incentives for Strong Performance

in Games and Economic Behavior, 109

par Corgnet, Brice (19..-....) ; Gómez-Miñambres, Joaquín ; Hernán-González, Roberto

2018 - 311-326 p. | En anglais

We study a principal–agent framework in which principals can assign wage-irrelevant goals to agents. We find evidence that, when given the possibility to set wage-irrelevant goals, principals select incentive contracts for which pay is less responsive to agents' performance. Agents' performance is higher in the presence of goal setting despite weaker incentives. We develop a principal–agent model with reference-dependent utility that illustrates how labor contracts combining weak monetary incentives and wage-irrelevant goals can be optimal. The pervasive use of non-monetary incentives in the workplace may help account for previous empirical findings suggesting that firms rely on unexpectedly weak monetary incentives.

Voir la revue «Games and Economic Behavior»

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