TY - JOUR
T1 - Principal–agent models where a principal is only affected by extreme performances
AU - Gerchak, Yigal
AU - Schmid, Christian
N1 - Publisher Copyright:
© 2021 The Authors. Managerial and Decision Economics published by John Wiley & Sons Ltd.
PY - 2022/3
Y1 - 2022/3
N2 - We consider an independent agents setting, where only the highest or lowest achievement affects the principal. An example of highest achievement scenario is the output of parallel research and development (R&D) teams, when only the highest/best achievement matters. An example of lowest achievement could be an assembly system, where the number of product units that can be assembled equals the lowest number of adequate parts of any component. The findings show that when only extreme performances matter, a principal employs weaker incentives for multiple agents. Furthermore, the reward parameter is especially small if only the lowest achievement is relevant.
AB - We consider an independent agents setting, where only the highest or lowest achievement affects the principal. An example of highest achievement scenario is the output of parallel research and development (R&D) teams, when only the highest/best achievement matters. An example of lowest achievement could be an assembly system, where the number of product units that can be assembled equals the lowest number of adequate parts of any component. The findings show that when only extreme performances matter, a principal employs weaker incentives for multiple agents. Furthermore, the reward parameter is especially small if only the lowest achievement is relevant.
UR - http://www.scopus.com/inward/record.url?scp=85124498672&partnerID=8YFLogxK
U2 - 10.1002/mde.3394
DO - 10.1002/mde.3394
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AN - SCOPUS:85124498672
SN - 0143-6570
VL - 43
SP - 468
EP - 477
JO - Managerial and Decision Economics
JF - Managerial and Decision Economics
IS - 2
ER -