Study on Dynamic Incentive Model for Managers

Abstract

Abstract: By using a principal and agent theory, a model of dynamic optimal incentive contract for managers is developed based on companies future performance achieved by managers longterm and shortterm effort. Conditions for achieving effective reputation and ways to enhance incentive effect are presented. It is shown that incentive strategy and managerial effort have great impact on companies future performance. The rationality and applicability of the model are illustrated by practical cases.

Key words: principal and agent, incentive, dynamic incentive contract

Liu Hong-yan, Zhang Yu-xi. Study on Dynamic Incentive Model for Managers[J]. Industrial Engineering Journal , 2012, 15(6): 126-131.

References

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