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Title:Relative performance evaluation in a multi-plant firm PDF Logo
Authors:Luporini, Annalisa
Issue Date:2005
Series/Report no.:CESifo working papers 1420
Abstract:We analyze optimal compensation schedules for the directors of two plants belonging to the same owner and producing the same good but serving geographically differentiated markets. Since the outcome of each director depends on his own effort and on a random variable representing market conditions, the problem takes the form of a principal multi-agent model. We first provide appropriate extensions of the MLR and CDF conditions that ensure the validity of the first-order approach in the single agent case. Then, we show that affiliation of the random variables is a necessary and sufficient condition for the compensation of one director to negatively and monotonically depend on the performance of the other.
Subjects:principal-agent problems
relative performance evaluation
first-order approach
monotone likelihood ratio
affiliation
JEL:D82
D23
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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