Fixed wages and bonuses in agency contracts: the case of a continuous state space

Racionero, Maria and Quiggin, John (2006) Fixed wages and bonuses in agency contracts: the case of a continuous state space. Journal of Public Economic Theory, 8 5: 761-777. doi:10.1111/j.1467-9779.2006.00287.x


Author Racionero, Maria
Quiggin, John
Title Fixed wages and bonuses in agency contracts: the case of a continuous state space
Journal name Journal of Public Economic Theory   Check publisher's open access policy
ISSN 1097-3923
1467-9779
Publication date 2006
Sub-type Article (original research)
DOI 10.1111/j.1467-9779.2006.00287.x
Volume 8
Issue 5
Start page 761
End page 777
Total pages 17
Editor J. P. Conley
M. H. Wooders
Place of publication US
Publisher Blackwell
Collection year 2006
Language eng
Subject C1
340207 Labour Economics
720402 Industrial relations
Abstract In this paper, we extend the state-contingent production approach to principal–agent problems to the case where the state space is an atomless continuum. The approach is modelled on the treatment of optimal tax problems. The central observation is that, under reasonable conditions, the optimal contract may involve a fixed wage with a bonus for above-normal performance. This is analogous to the phenomenon of "bunching" at the bottom in the optimal tax literature.
Q-Index Code C1

Document type: Journal Article
Sub-type: Article (original research)
Collections: Excellence in Research Australia (ERA) - Collection
2007 Higher Education Research Data Collection
School of Economics Publications
 
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Created: Wed, 15 Aug 2007, 11:00:39 EST