Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92703
Authors: 
Ishida, Junichiro
Year of Publication: 
2012
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 838
Abstract: 
This paper explores the consequences of sabotage for the design of incentive contracts. The possibility of sabotage gives rise to a dynamic concern, similar to the Ratchet effect, which distorts the agents' incentives. We first show that the mere possibility of sabotage may make it impossible to implement the first-best effort, and then offer two distinct incentive schemes, fast track and late selection, to circumvent this problem. The present model offers a mechanism through which these two schemes arise in a unified framework.
Subjects: 
Sabotage
Tournament
Fast track
Late selection
JEL: 
J41
M12
Document Type: 
Working Paper

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