Adverse specialization
Journal Article (Journal Article)
We analyze a multiple-activity, principal-agent model in which the activities are naturally substitutable for the agent and complementary for the principal. A basic result is that the optimal compensation must cause the agent to view the activities as complements. This complementarity is achieved by employing a compensation scheme that is typically nonmonotone and makes success on multiple dimensions the sole source of large rewards. A number of empirical implications follow, along with explanations for some existing empirical findings. We also discuss applications to compensation in specific occupations.
Full Text
Duke Authors
Cited Authors
- MacDonald, G; Marx, LM
Published Date
- January 1, 2001
Published In
Volume / Issue
- 109 / 4
Start / End Page
- 864 - 899
International Standard Serial Number (ISSN)
- 0022-3808
Digital Object Identifier (DOI)
- 10.1086/322084
Citation Source
- Scopus