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Multiperiod Contract Problems with VeriÖable and UnveriÖable Outputs

Author

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  • Kazuya Kamiya

    (Faculty of Economics, University of Tokyo)

  • Meg Adachi-Sato

    (Royal Melbourne Institute of Technology University)

Abstract

　　 Why do some employees receive only …xed or incentive pay, while others receive a mix of …xed and incentive pay? Moreover, why do the lengths of wage contracts di¤er across these types of pay? This paper attempts to respond to this economic puzzle by developing a theoretical model of multiperiod contracts that incorporates short-, medium-, and long-term contracts with di¤erent wage pro…les. We obtain di¤erent combinations of these contracts as equilibria when the e¢ ciency of investment in human capital changes endogenously over time.

Suggested Citation

  • Kazuya Kamiya & Meg Adachi-Sato, 2013. "Multiperiod Contract Problems with VeriÖable and UnveriÖable Outputs," CIRJE F-Series CIRJE-F-896, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2013cf896
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2013/2013cf896.pdf
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    References listed on IDEAS

    as
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    5. Rey, Patrick & Salanie, Bernard, 1990. "Long-term, Short-term and Renegotiation: On the Value of Commitment in Contracting," Econometrica, Econometric Society, vol. 58(3), pages 597-619, May.
    6. Linlin Ma & Yuehua Tang & Juan‐Pedro Gómez, 2019. "Portfolio Manager Compensation in the U.S. Mutual Fund Industry," Journal of Finance, American Finance Association, vol. 74(2), pages 587-638, April.
    7. Bengt Holmström, 1999. "Managerial Incentive Problems: A Dynamic Perspective," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 169-182.
    8. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
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    Cited by:

    1. Meg Adachi-Sato, 2013. "Incentive Pay that Causes Inefficient Managerial Replacement ," CIRJE F-Series CIRJE-F-890, CIRJE, Faculty of Economics, University of Tokyo.
    2. Meg Adachi-Sato & Kazuya Kamiya, 2011. "A Dynamic Multitask Model: Fixed Wages, No Externalities, and Holdup Problems," CIRJE F-Series CIRJE-F-825, CIRJE, Faculty of Economics, University of Tokyo.

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