On Optimal Contracting with Subjective Evaluation

@article{MacLeod2001OnOC,
  title={On Optimal Contracting with Subjective Evaluation},
  author={W. Bentley MacLeod},
  journal={Organizations \& Markets eJournal},
  year={2001}
}
  • W. MacLeod
  • Published 1 May 2001
  • Economics
  • Organizations & Markets eJournal
This paper extends the standard principal-agent model to allow for subjective evaluation. The optimal contract results in more compressed pay relative to the case with verifiable performance measures. Moreover, discrimination against an individual implies lower pay and performance, suggesting that the extent of discrimination as measured after controlling for performance may underestimate the level of true discrimination. Finally, the optimal contract entails the use of bonus pay rather than… Expand
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