Monitoring, Performance Reviews, and Retaliation
研究在委托人、监督者和代理人三层结构中，报复如何影响最优合同设计，发现容忍更多报复能获取更准确信息，且绩效评估膨胀和压缩是公司应对报复的理性选择。
We analyze the effects of retaliation on optimal contracts in a hierarchy consisting of a principal, a monitor, and an agent. With probability m, the monitor observes a signal about the agent’s effort and decides what to report to the principal. With probability [Formula: see text], the monitor only observes an uninformative default signal realization. The agent retaliates against the monitor and the principal whenever the monitor’s report reduces the agent’s payment from an endogenously determined default level. We show that the principal’s optimal contracting problem can be divided into two steps: First is an information acquisition stage. The principal chooses how much retaliation to tolerate, and more retaliation generates more informative signals (in the Blackwell sense) about the agent’s effort. Second, given the information acquired, the principal designs the optimal payment schemes, which pool moderately (potentially all) bad agent performances with the uninformative signal realization. The empirical literature documents that supervisors are reluctant to provide poor ratings and that performance reports are often inflated and compressed. We show that such a pattern in performance appraisals can arise as firms’ optimal responses to retaliation concerns. This paper was accepted by Joshua Gans, business strategy. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2023.01226 .