Non-commitment in performance evaluation and the problem of information distortions |
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Authors: | Kay Mitusch |
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Affiliation: | aTechnische Universität Berlin, Sekr. H 33, Straße des 17, Juni 135 10623 Berlin, Germany |
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Abstract: | Auditing is modeled in a sequential game without commitment. The manager must decide whether and where to audit a worker's output, taking into account all interim information he has obtained. The worker will work just hard enough (and show it) to divert the manager from making an audit or cover up, withholding information about his work to make an audit more difficult. This usually raises the costs of setting work incentives, so incentives are softened, sometimes drastically. Moreover, when a worker's on-the-job information is valuable for entrepreneurial decisions, work incentives must be softened to improve the internal flow of information. |
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Keywords: | Principal-agent relationship Auditing without commitment Internal organization Information transmission Influence activities Subjective performance evaluation |
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