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Strategy & Business Economics Workshop - Michael Powell - CANCELLED

Thu, 03/16/2017 - 4:15pm

Michael Powell

Northwestern University

333 Sage Hall

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We consider how a rm's policies constrain its relational contracts.  A policy is a sequence of decisions made by a principal; each decision determines how agents' eorts aect their outputs. We consider surplus-maximizing policies in a exible dynamic moral hazard problem between
a principal and several agents with unrestricted vertical transfers and no commitment. If each agent observes only his own output and pay, then the principal might optimally implement dynamically inecient, history-dependent policies to credibly reward high-performing agents.  We develop conditions under which such backward-looking policies are surplus-maximizing and then illustrate how they inuence hiring, investment, and performance.

Event Categories: Strategy & Business Economics