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All-or-nothing payments

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  • Chen, Bo

Abstract

We develop a general principal–agent framework in which to study optimal incentive schemes where agents are hired to work on multiple heterogeneous and interdependent projects. The incentive schemes can be based on output measures, interpreted as the principal’s payoffs, as well as input measures, regarded as observation of some of the agents’ efforts. We identify that a unifying feature of the optimal incentive schemes, called all-or-nothing payments, arises in three natural scenarios of the general framework: unobservable inputs, verifiable inputs, and observable but unverifiable inputs. Our framework and results embed and generalize several previous studies on multitask principal–agent problems with a limited liability constraint.

Suggested Citation

  • Chen, Bo, 2012. "All-or-nothing payments," Journal of Mathematical Economics, Elsevier, vol. 48(3), pages 133-142.
    • Handle: RePEc:eee:mateco:v:48:y:2012:i:3:p:133-142
    DOI: 10.1016/j.jmateco.2012.02.003
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    4. David Rietzke & Yu Chen, 2020. "Push or pull? Performance‐pay, incentives, and information," RAND Journal of Economics, RAND Corporation, vol. 51(1), pages 301-317, March.
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    7. Lu, Jingfeng & Shen, Bo & Wang, Zhewei, 2024. "Performance bundling in multi-dimensional competitions," International Journal of Industrial Organization, Elsevier, vol. 95(C).
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    9. Bo Chen & Yu Chen & David Rietzke, 2017. "Simple Contracts under Observable and Hidden Actions," Graz Economics Papers 2017-07, University of Graz, Department of Economics.
    10. Asunur Cezar & Huseyin Cavusoglu & Srinivasan Raghunathan, 2014. "Outsourcing Information Security: Contracting Issues and Security Implications," Management Science, INFORMS, vol. 60(3), pages 638-657, March.

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