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Performance measurement, expectancy and agency theory: an experimental study
[journal article]
Abstract Theoretical analyses of (optimal) performance measures are typically performed within the realm of the linear agency model. This model implies that, for a given compensation scheme, the agent’s optimal effort is unrelated to the amount of noise in the performance measure. In contrast, expectancy the... view more
Theoretical analyses of (optimal) performance measures are typically performed within the realm of the linear agency model. This model implies that, for a given compensation scheme, the agent’s optimal effort is unrelated to the amount of noise in the performance measure. In contrast, expectancy theory as developed by psychologists predicts lower effort levels for noisier performance measures. We conduct a real effort laboratory experiment and find that effort levels are invariant to changes in the distribution of the noise term. This suggests that enriching the economic model commonly applied within this area by including an expectancy parameter is not needed.... view less
Classification
Methods and Techniques of Data Collection and Data Analysis, Statistical Methods, Computer Methods
Free Keywords
Performance measurement; Expectancy theory; Real effort experiments; Agency theory; Personnel economics
Document language
English
Publication Year
2008
Page/Pages
p. 794-809
Journal
Journal of Economic Behavior & Organization, 67 (2008) 3-4
DOI
https://doi.org/10.1016/j.jebo.2007.09.003
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)