On the efficiency of the rank-order contract under moral hazard and adverse selection

• 成果类型: Article
• 署名作者: Yun, JY
• 刊物名称: JOURNAL OF LABOR ECONOMICS
• ISSN/ISSBN: 0734-306X
• DOI: 10.1086/209868
• 发表日期: 1997
• 页码: 466-494
• 关键词: tournaments; incentives; INFORMATION; prizes

摘要

This article analyzes the efficiency of the rank-order contract for a finite number of risk-neutral agents under both moral hazard and adverse selection. The first-best outcome is shown to be supported by a set of rank-order contracts which penalize a small fraction of agents but do so heavily. The article also shows how these rank-order contracts compare with these giving a large prize to few agents. Finally, the article provides an informal argument for why firms do not follow a penalty-giving rank-order contract in their promotion policies as often as the theory predicts.