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Author: Joseph L. Midler Publisher: ISBN: Category : Contracting out Languages : en Pages : 356
Book Description
Several versions of the negotiation of the parameters of incentive contracts between a government and private contractors are formulated as game theoretical models. This framework permits one focus upon a number of aspects that have previously been overlooked such as the interaction of the participants, the lack of domination by one side or the other, constraints upon the player's strategies, and the possible joint interests of the one party in the other player's outcome. Computational methods of solution are suggested. (Author).
Author: Joseph L. Midler Publisher: ISBN: Category : Contracting out Languages : en Pages : 356
Book Description
Several versions of the negotiation of the parameters of incentive contracts between a government and private contractors are formulated as game theoretical models. This framework permits one focus upon a number of aspects that have previously been overlooked such as the interaction of the participants, the lack of domination by one side or the other, constraints upon the player's strategies, and the possible joint interests of the one party in the other player's outcome. Computational methods of solution are suggested. (Author).
Author: Milind Dawande Publisher: ISBN: Category : Languages : en Pages : 48
Book Description
Motivated by the ever-growing complexity of projects and the consistent trend of outsourcing of individual tasks or components, we study the contract-design problem faced by a firm (or organization) for executing a project consisting of multiple tasks, each of which is performed by an individual contractor whose efforts (work-rates) are not observable. While the contractors incur costs continuously during the course of their tasks, the firm realizes its reward or revenue only when the entire project is (i.e., all tasks are) completed. The firm's contract-design decisions and the contractors' effort-level decisions are all governed by the goals of maximizing the respective party's expected discounted profit. We adopt the framework in Kwon et al. (2010a) and Chen et al. (2015), and derive optimal contracts for both parallel projects (tasks can be performed in parallel) and sequential projects (tasks have to be performed sequentially). The simplicity of the contracts we obtain suggests that there is potential for designing profit-maximizing contracts without paying a price in terms of contract complexity.
Author: Robert Puelz Publisher: ISBN: Category : Languages : en Pages :
Book Description
Predictions concerning structure and performance for managerial incentive contracts designed to prevent accidents are developed and tested. The model predicts a step-function penalty with more costly, more reliable audits used for higher loss reports to control ex post exaggeration of the loss. In addition, the penalty induces nonreporting that is imperfectly controlled through random audits. An empirical contract implemented to control workers' compensation medical losses provides evidence consistent with these predictions. The contract reduces both accident frequency and total losses, but increases reported loss severity as managers evade approximately 40 percent of the accident penalty by underreporting small losses.
Author: Robert Gibbons Publisher: ISBN: Category : Compensation management Languages : en Pages : 70
Book Description
This paper studies career concerns -- concerns about the effects of current performance on future compensation -- and describes how optimal incentive contracts are affected when career concerns are taken into account. Career concerns arise frequently: they occur whenever the market uses a worker's current output to update its belief about the worker's ability and competition then forces future wages (or wage contracts) to reflect these updated beliefs. Career concerns are stronger when a worker is further from retirement, because a longer prospective career increases the return to changing the market's belief. In the presence of career concerns, the optimal compensation contract optimizes total incentives -- the combination of the implicit incentives from career concerns and the explicit incentives from the compensation contract. Thus, the explicit incentives from the optimal compensation contract should be strongest when a worker is close to retirement. We find empirical support for this prediction in the relation between chief-executive compensation and stock-market performance.
Author: Borys Grochulski Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
We study the implications of job destruction risk for optimal incentives in a long-term contract with moral hazard. We extend the dynamic principal-agent model of Sannikov (2008) by adding an exogenous Poisson shock that makes the match between the firm and the agent permanently unproductive. In modeling job destruction as an exogenous Poisson shock, we follow the Diamond-Mortensen-Pissarides search-and-matching literature. The optimal contract shows how job destruction risk is shared between the rm and the agent. Arrival of the job-destruction shock is always bad news for the rm but can be good news for the agent. In particular, under weak conditions, the optimal contract has exactly two regions. If the agent's continuation value is below a threshold, the agent's continuation value experiences a negative jump upon arrival of the job-destruction shock. If the agent's value is above this threshold, however, the jump in the agent's continuation value is positive, i.e., the agent gets rewarded when the match becomes unproductive. This pattern of adjustment of the agent's value at job destruction allows the firm to reduce the costs of effort incentives while the match is productive. In particular, it allows the firm to adjust the drift of the agent's continuation value process so as to decrease the risk of reaching either of the two inefficient agent retirement points. Further, we study the sensitivity of the optimal contract to the arrival rate of job destruction.
Author: Gregory Sanders Publisher: Rowman & Littlefield ISBN: 1442280662 Category : Political Science Languages : en Pages : 74
Book Description
Traditional contracting is primarily transactional, rewarding contractors when deliveries are made or certain process milestones are met. Performance-Based Logistic (PBL) contracting seeks to base contractor incentives on ongoing performance measures to achieve reliability and cost savings. Key to the success of these arrangements are the incentives that align the interests of the customer and the vendor. This report describes the incentives used in PBL contracts, identifies best practices, and provides recommendations for effective incentives going forward. The study team interviewed PBL practitioners including defense-unique contractors, defense-commercial contractors, and experts who are knowledgeable in the government perspective in the United States and abroad. The team supplemented these interviews by analyzing a PBL dataset of U.S. Department of Defense contracts. Of the four identified categories of incentives—time-based, financial, scope, and other—interviews found that time-based incentives stood out for their reliable appeal and relative underuse in the United States.
Author: Joseph L. Midler
Author: Joseph L. Midler
Author: Milind Dawande
Author: Robert Puelz
Author: Robert Gibbons
Author: Joel S. Demski
Author: George Baker
Author: 
Author: Borys Grochulski
Author: Robert A. J. Dur
Author: Gregory Sanders