Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-33290
In a pioneering approach towards the explanation of the phenomenon of “yes man” behavior in organizations, Prendergast [American Economic Review 83 (1993) 757–770] argued that incentive contracts in employment relationships generally make a worker distort his privately acquired information. This would imply that there is a trade-off between inducing a worker to exert costly effort and inducing him to tell the truth. In contrast, we show that with optimally designed contracts, which we term integrity contracts, the worker will both exert effort and report his information truthfully, and hence the first best can be achieved.
|Item Type:||Journal Article, refereed, original work|
|Communities & Collections:||03 Faculty of Economics > Department of Economics|
|Deposited On:||08 Apr 2010 11:15|
|Last Modified:||23 Nov 2012 17:20|
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