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Key InsightsHow to solve:
Holmstrom (1999) - Managerial Incentive Problems (view source)
Revision as of 18:57, 7 April 2010
, 18:57, 7 April 2010→Quick Summary
*A competitive labour market
*Competitive labour market bids up to the expected output that a manager will provide
*In equilibrium the beliefs of the labour market are correct
Key Resultsresults:
*The labour market acts as an indirect mechanism for linking past-performance to wages
*Career concerns generally do not provide first best incentives, they over and/or under shoot
