Optimal contracts for lenient supervisors

B-Tier
Journal: Journal of Economic Behavior and Organization
Year: 2012
Volume: 81
Issue: 2
Pages: 403-420

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We analyze optimal contracts in a hierarchy consisting of a principal, a supervisor and an agent. The supervisor is either neutral or altruistic towards the agent, but his preferences are private information. In a model with two supervisor types, we find that the optimal contract may be very simple, paying the supervisor a flat wage independent of his type and his evaluation of the agent's effort. Such a contract induces the neutral type of supervisor to report the agent's performance truthfully, while the altruistic type reports favorably independent of performance. Accordingly, overstated performance (leniency bias) may be the outcome of an optimal contract under informational asymmetries.

Technical Details

RePEc Handle
repec:eee:jeborg:v:81:y:2012:i:2:p:403-420
Journal Field
Theory
Author Count
2
Added to Database
2026-01-25