scholarly journals Optimal Information Design and Incentive Contracts with Performance Measure Manipulation

2019 ◽  
Author(s):  
Robert F. Goex ◽  
Beatrice Michaeli
Keyword(s):  
Performance Measure ◽  
Information Design ◽  
Incentive Contracts ◽  
Optimal Information

scholarly journals Information Acquisition and Its Incentives in an E-Commerce Supply Chain under the Offline Showroom Model

2021 ◽  
Vol 16 (5) ◽  
pp. 1791-1804
Author(s):  
Mengli Li ◽  
Xumei Zhang
Keyword(s):  
Supply Chain ◽  
Information Acquisition ◽  
Incentive Contracts ◽  
Demand Forecast ◽  
Competition Intensity ◽  
Demand Information ◽  
Optimal Information ◽  
Acquisition Strategy ◽  
The One ◽  
The Impact

Recently, the showroom model has developed fast for allowing consumers to evaluate a product offline and then buy it online. This paper aims at exploring the optimal information acquisition strategy and its incentive contracts in an e-commerce supply chain with two competing e-tailers and an offline showroom. Based on signaling game theory, we build a mathematical model by considering the impact of experience service and competition intensity on consumers’ demand. We find that, on the one hand, information acquisition promotes supply chain members to obtain demand information directly or indirectly, which leads to forecast revenue. On the other hand, information acquisition promotes supply chain members to distort optimal decisions, which results in signal cost. The optimal information acquisition strategy depends on the joint impact of forecast revenue, signal cost and demand forecast cost. Notably, in some conditions, the offline showroom will not acquire demand information even when its cost is equal to zero. We also design two different information acquisition incentive contracts to obtain Pareto improvement for all supply chain members.

scholarly journals Information Design

2019 ◽  
Vol 11 (4) ◽  
pp. 151-185 ◽  
Author(s):  
Ina Taneva
Keyword(s):  
Information Structure ◽  
Information Design ◽  
Signal Distribution ◽  
Private Signals ◽  
Optimal Information

A designer commits to a signal distribution that is informative about a payoff-relevant state. Conditional upon the privately observed signals, agents take actions that affect their payoffs as well as those of the designer. We show how to derive the (designer) optimal information structure in static finite environments. We fully characterize it in a symmetric binary setting for a parameterized game. In this environment, conditionally independent private signals are never strictly optimal. (JEL C72, D78, D82, D83)

scholarly journals Information and Communication in Organizations

2019 ◽  
Vol 109 ◽  
pp. 545-549 ◽  
Author(s):  
Inga Deimen ◽  
DezsÖ Szalay
Keyword(s):  
Decision Making ◽  
Decision Maker ◽  
Design Problem ◽  
Information Structure ◽  
Information Design ◽  
Communication In Organizations ◽  
Information And Communication ◽  
Optimal Information

We study a constrained information design problem in an organization. A designer chooses the information structure. A sender with preferences different from the decision-maker observes and processes the information before he communicates with the decision-maker. Information shapes conflicts within the organization: the optimal information structure essentially eliminates conflicts and serves as a substitute to the allocation of decision-making authority in the organization.

scholarly journals Optimal Information Design for Search Goods

2019 ◽  
Vol 109 ◽  
pp. 550-556 ◽  
Author(s):  
Michael Choi ◽  
Kyungmin Kim ◽  
Marilyn Pease
Keyword(s):  
Information Design ◽  
Elastic Demand ◽  
True Value ◽  
Monopoly Pricing ◽  
Optimal Information

We consider a monopoly pricing problem in which a consumer with an uncertain valuation of a search good receives a signal of value before deciding whether to visit the seller. She discovers her true value upon visiting and before purchase. We characterize the consumer-optimal and seller-worst signals in such an environment and deliver two main insights. First, both the consumer-optimal and seller-worst signals generate a unit-elastic demand. Second, the two signals coincide if and only if visitation costs are sufficiently small.

Discretion in Bonus Plans

2010 ◽  
Vol 85 (6) ◽  
pp. 1921-1949 ◽  
Author(s):  
Merle Ederhof
Keyword(s):  
Financial Performance ◽  
Performance Measures ◽  
Empirical Support ◽  
Performance Measure ◽  
Incentive Contracts ◽  
Bonus Payments ◽  
Medium Range ◽  
Primary Hypothesis ◽  
Discretionary Bonuses ◽  
Bonus Plans

ABSTRACT: This study examines discretionary bonus payments by firms to senior-level executives. Interpreting discretionary bonuses as the result of implicit incentive contracts, I analyze an analytical model that includes a contractible and a non-contractible performance measure. The model yields the primary hypothesis that discretionary bonuses occur when the outcome of the contractible measure is either low or high, but not when the contractible outcome falls in the medium range. Based on a sample collected from public sources, I find empirical support for the notion that discretionary bonuses are paid based on non-contractible performance measures that are related to future financial performance. Moreover, discretionary bonus payments occur significantly more often when the contractible performance measure falls in the tails of the distribution. In contrast, I do not find support for the predictions that discretionary bonus payments are related to the manipulability of the contractible performance measures or that discretionary bonus payments are related to the power of the executives in the companies.

Performance Measure Properties and the Effect of Incentive Contracts

2006 ◽  
Vol 18 (1) ◽  
pp. 55-75 ◽  
Author(s):  
Jan Bouwens ◽  
Laurence van Lent
Keyword(s):  
Performance Measures ◽  
Organizational Context ◽  
Employee Selection ◽  
Contract Design ◽  
Performance Measure ◽  
Incentive Contracts ◽  
Third Party ◽  
Selection Effects ◽  
Design Characteristics ◽  
Using Data

Using data from a third-party survey on compensation practices at 151 Dutch firms, we show that less noisy or distorted performance measures and higher cash bonuses are associated with improved employee selection and better-directed effort. Specifically, (1) an increase in the cash bonus increases the perceived selection effects of incentive contracts, but does not independently affect the perceived amount and direction of effort that employees deliver, and (2) performance measure properties directly impact both effort and the selection functioning of incentive contracts. These results hold after controlling for an array of incentive contract design characteristics and for differences in organizational context. Our estimation procedures address several known problems with using secondary datasets.

Bayesian Persuasion and Information Design

2019 ◽  
Vol 11 (1) ◽  
pp. 249-272 ◽  
Author(s):  
Emir Kamenica
Keyword(s):  
Partial Information ◽  
Information Design ◽  
The State ◽  
Social Planner ◽  
Job Outcomes ◽  
Noisy Information ◽  
Data Generating Process ◽  
Optimal Information

A school may improve its students’ job outcomes if it issues only coarse grades. Google can reduce congestion on roads by giving drivers noisy information about the state of traffic. A social planner might raise everyone's welfare by providing only partial information about solvency of banks. All of this can happen even when everyone is fully rational and understands the data-generating process. Each of these examples raises questions of what is the (socially or privately) optimal information that should be revealed. In this article, I review the literature that answers such questions.

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