Performance Standards and Incentive Pay in Agency Contracts
研究了当有限责任限制委托人罚款时，最优合同设定绩效标准，未达标则惩罚、大幅超标则利润分享，并讨论了标准的选择。
When the presence of limited liability restricts a principal from imposing monetary fines on an agent in case of poor performance, the principal might use other kinds of punishment threats to deter the agent from shirking. We show that under the optimal contract in this case, the principal sets a performance standard and punishes the agent if the standard is not met, but rewards the agent on a profit‐sharing basis if the standard is significantly exceeded. The optimal choice of performance standards for such contracts is discussed. It is shown that punishment threats, although inefficient, often help the principal to discipline the agent.