Effect of a Manager in Relational Contracts with Multiple Workers
Fuente:
arXiv
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| Format: | Preprint |
| Veröffentlicht: |
2025
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| _version_ | 1866915267135668224 |
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| author | Kim, Beomjun |
| author_facet | Kim, Beomjun |
| contents | This paper considers the optimal management structure about hiring a manager and providing the manager with a separate salary and bonus using a relational contract among an owner, a manager, and workers, assuming that the manager can observe individual worker performances while the owner can observe only overall team performance. I derive optimal contracts for the two cases in which the manage's salary and bonus are integrated into total team bonus or provided separately. I compare situations of having the manager distribute bonuses based on individual worker performance to the situation of equal bonus distribution based on overall team performance without a manager. Only a contract with a manager who receives a separate bonus is feasible for low discount factor. Making the manager to distribute the salary and bonus including himself is best with intermediate discount factor. Providing an equal bonus without a manager is optimal with high discount factor. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2504_21264 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Effect of a Manager in Relational Contracts with Multiple Workers Kim, Beomjun Theoretical Economics This paper considers the optimal management structure about hiring a manager and providing the manager with a separate salary and bonus using a relational contract among an owner, a manager, and workers, assuming that the manager can observe individual worker performances while the owner can observe only overall team performance. I derive optimal contracts for the two cases in which the manage's salary and bonus are integrated into total team bonus or provided separately. I compare situations of having the manager distribute bonuses based on individual worker performance to the situation of equal bonus distribution based on overall team performance without a manager. Only a contract with a manager who receives a separate bonus is feasible for low discount factor. Making the manager to distribute the salary and bonus including himself is best with intermediate discount factor. Providing an equal bonus without a manager is optimal with high discount factor. |
| title | Effect of a Manager in Relational Contracts with Multiple Workers |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2504.21264 |