Retention contracts with asymmetric information: optimistic approach vs pessimistic approach
يناير 01, 2023
DOI: 10.1108/JFRA-12-2021-0488
Publisher: Emerald
Purpose: This paper aims to focus on the utilization of retention contracts to screen and discipline managers in a context in which the council, board of directors, possesses incomplete information about the consequences of managers’ decisions. The analysis enlightens us on empire building, on the slight connection between achievement and firing, and describes concerns about the belief that low achievements result from bad managers. Design/methodology/approach: This paper analyzes a basic model to show the resulting dilemmas. The desire to screen managers to enhance the organization's future well-being motivates managers to show their credentials by becoming excessively active. The council can address this bias by firing a manager whose project is proven to ruin value. Moreover, the council can replace the manager if he has implemented a project but its outcomes remain unobservable. Both decisions decrease the attraction to develop loss-generating projects. However, the dismissing decision on either ground will affect the council deduction that the expected competence of the incoming manager is lower than that of the dismissed manager. Findings: This study shows in which situation the selection option is preferred over the disciplining option using two different retention contracts: optimistic contract and pessimistic contract. Originality/value: This study shows in which situation the selection option is preferred over the disciplining option using two different retention contracts: optimistic contract and pessimistic contract.
Other Researches
An optimized SDN framework for the internet of things
Low-power wireless networks (LPWN) have traditionally been central to the Internet of Things (IoT) discussion. Nevertheless, as these networks grow more complex, their control architectures and protocols reveal significant limitations, particularly ...
Automatic Speech Emotion Recognition (ASER) is a critical aspect of affective computing, which detects emotions in speech to facilitate efficient human-computer interaction. An area that has received little attention in previous research is the Alge...
Inheritance Modeling in Distributed Object-Oriented Design: An Extended G-Nets Model
The emergence of an object-oriented paradigm has been beneficial for complex software development, and this paradigm has been used to develop architectures for distributed systems. Many object-oriented architectures have been suggested for developin...
Supplier selection strategies evaluation: a multi-agent based simulation
Local food systems have gained prominence in response to increasing consumer demand for locally produced food, driven by heightened interest in diet, food quality, sourcing, production methods, and food safety. These systems support the economic sus...
Smart Contracts and Blockchain-Based Tools for Privacy-Preservation
This research paper aims to investigate smart contracts and Blockchain technology to build a privacy-sensitive application focusing on a Digital Medication Plan (DMR) containing prescriptions. The DMR is used just as a use case. However, the propose...
Purpose: Saudi Arabia is the main destination of religious tourism, as it has many spiritual places. With the passage of years, the figures for pilgrim visits are increasing, which is contributing to the economic growth of the Kingdom of Saudi Arabi...
Retention Contracts under Partial Information Electoral Competition Case Study
This study copes with a class of principal-agent problems where information asymmetry represents an important characteristic. The paper examines the relationship between the principal and agents. The principal has to perform two agents’ screening an...
Formal Approach to Data Accuracy Evaluation
Usually, data quality is defined by multiple attributes that allow classifying the output data (such as completeness, freshness, and accuracy) or the methods exploiting these data (such as dependability, performance, and protection). Among the sugge...
Managing asymmetric information effects in decision making: Task complexity-based model
This paper proposes a formal model to manage the impact of asymmetric information in decision-making by using principal-agent problems in which an agent (who has incomplete information) must decide to perform or not perform a task on behalf of the p...
Identity Identification and Management in the Internet of Things
Henceforth, users agreed on the necessity of continuous Internet connection independently of the place, the manner, and the time. Nowadays, several elite services are accessible by people over the Internet of Things (IoT), which is a heterogeneous n...
Identity Management System Model in the Internet of Things
This paper describes the identity management system (IdMS) by defining system and user requirements. Additionally, it introduces the IdMS concept that approaches the things identity management. Moreover, the paper deeply describes the IdMS features ...