Skip to Main content Skip to Navigation
Journal articles

Aligning Ambition and Incentives

Abstract : Labor turnover creates longer term career concerns incentives that motivate employees in addition to the short-term monetary incentives provided by the current employer. We analyze how these incentives interact and derive implications for the design of incentive contracts and organizational choice. The main insights stem from a trade-off between "good monetary incentives" and "good reputational incentives." We show that the principal optimally designs contracts to create ambiguity about agents' abilities. This may make it optimal to contract on relative performance measures, even though the extant rationales for such schemes are absent. Linking the structure of contracts to organizational design, we show that it can be optimal for the principal to adopt an opaque organization where performance is not verifiable, despite the constraints that this imposes on contracts.
Document type :
Journal articles
Complete list of metadatas

https://hal-hec.archives-ouvertes.fr/hal-00641638
Contributor : Antoine Haldemann <>
Submitted on : Wednesday, November 16, 2011 - 1:08:35 PM
Last modification on : Thursday, January 11, 2018 - 6:19:31 AM

Links full text

Identifiers

Collections

Citation

Eloïc Peyrache, Alexander K. Koch. Aligning Ambition and Incentives. Journal of Law, Economics, and Organization, Oxford University Press (OUP), 2011, 27 (3), pp.655-688. ⟨10.1093/jleo/ewp034⟩. ⟨hal-00641638⟩

Share

Metrics

Record views

229