PERFORMANCE PAY AS A SCREENING DEVICE
Marc C. Chopin
(Assistant Professor, Department of Economics and Finance, College of Administration and Business, Louisiana Tech University, Ruston, LA 71272)
Craig T. Schulman
(Associate Professor, Department of Economics, University of Arkansas, Fayetteville, AR 72701)
122
Abstract
Analysis of management compensation has focused on the principal — agent problem. We address the problem confronting owners who must choose a manager without knowing the productivity of individual managers. We find performance contingent contracts may result in a separating equilibrium in which high productivity managers accept contracts low productivity managers find unacceptable.
Citation
Chopin, M.C. and Schulman, C.T. (1997), "PERFORMANCE PAY AS A SCREENING DEVICE", Studies in Economics and Finance, Vol. 18 No. 2, pp. 94-108. https://doi.org/10.1108/eb028744
Publisher
:MCB UP Ltd
Copyright © 1997, MCB UP Limited