CaltechAUTHORS
  A Caltech Library Service

Firing in Non-Repeated Incentive Contracts

Sherstyuk, Katerina (1993) Firing in Non-Repeated Incentive Contracts. Social Science Working Paper, 811. California Institute of Technology , Pasadena, CA. (Unpublished) https://resolver.caltech.edu/CaltechAUTHORS:20170828-161619896

[img] PDF (sswp 811 - May 1993) - Submitted Version
See Usage Policy.

586kB

Use this Persistent URL to link to this item: https://resolver.caltech.edu/CaltechAUTHORS:20170828-161619896

Abstract

When the presence of limited liability restricts a principal from imposing monetary fines on an agent in case of poor performance, the principal might use other kinds of punishment threats to deter the agent from shirking. If firing is costly to the agent it can be used by the principal even in non-repeated contracts. This paper considers the conditions under which a profit-sharing arrangement combined with a certain firing rule improves the principal's position compared to the situation in which firing is not an option. The optimal firing rule is established, and its effectiveness is considered as a function of exogenous economic variables. Possible applications of the proposed contract are suggested.


Item Type:Report or Paper (Working Paper)
Additional Information:Revised version. Original dated to September 1992. I would like to thank John Ledyard, Morgan Kousser, Tom Palfrey and Jeffrey Banks for their help and suggestions. I also benefited from discussions with Kim Border, Rod Kiewiet, Matthew Spitzer, Yan Chen and Olga Shvetsova. Financial assistance from the Flight Projects Office of the Jet Propulsion Laboratory (JPL) of NASA to the Program on Organization Design (PrOD) is greatly appreciated. Any errors are my own.
Group:Social Science Working Papers
Funders:
Funding AgencyGrant Number
JPLUNSPECIFIED
Series Name:Social Science Working Paper
Issue or Number:811
Record Number:CaltechAUTHORS:20170828-161619896
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20170828-161619896
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80878
Collection:CaltechAUTHORS
Deposited By: Jacquelyn Bussone
Deposited On:28 Aug 2017 23:26
Last Modified:03 Oct 2019 18:36

Repository Staff Only: item control page