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Design of firm‐specific training in an agency relationship: Who should take the initiative?

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  • Anthony M. Marino

Abstract

This paper considers the twofold problem of compensation contracting and the design of a human capital investment scheme. Before contracting, the principal and the agent can engage in a joint stochastic production process of exerting effort to raise the agent's productivity in the firm. The principal can employ synchronous effort exertion, or either actor can assume a leadership role. We determine which organizational design is best for the principal at the endogenously optimal compensation contract, depending on how the efforts interact.

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  • Anthony M. Marino, 2019. "Design of firm‐specific training in an agency relationship: Who should take the initiative?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 40(2), pages 127-140, March.
    • Handle: RePEc:wly:mgtdec:v:40:y:2019:i:2:p:127-140
    DOI: 10.1002/mde.2986
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