Location of Repository

Career Concerns and Short-Term Contracts

By Oddvar M. Kaarbøe and Trond E. Olsen


We study optimal incentive contracts when commitments are limited, and agents have multiple tasks and career concerns. The agent career concerns are determined by the outside market. We show that the optimal compensation contract optimizes the combination of implicit incentives from both career concerns and ratchet effects. In contrast to existing results, implicit and explicit incentives might be complements, and the principal might want to give strongest explicit incentives for agents far from retirement to account for the fact that career concerns might induce behavior in conflict with the principal’s preferences. Furthermore, we show that maximized welfare might be decreasing in the strength of the career concerns

Year: 2000
OAI identifier: oai:CiteSeerX.psu:
Provided by: CiteSeerX
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://citeseerx.ist.psu.edu/v... (external link)
  • http://www.nhh.no/for/seminars... (external link)
  • Suggested articles

    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.