Incentives, ability and disutility of effort

Executive Stock Options with Effort Disutility and Choice of Volatility∗

We consider the problem of an executive that receives call options as compensation in a dynamic setting. She can influence the stock price return with her effort. In addition, she determines the level of volatility of the stock through the choice of projects. The executive is risk-averse and experiences disutility from the effort. In this framework, we introduce the problem of the company that ...

Promotion Incentives and Teacher Effort in China

This paper examines the effort incentives of teachers in rural China. China employs a complex system of annual evaluations and promotions for civil servants in which good evaluations, along with a teacher's years of service and education, make teachers eligible to apply for rank promotions. A model of promotions is developed in which agents are both incentivized, and are sorted into ranks by ab...

Career Concerns Incentives and Teacher Effort

I present a generalization to the standard career concerns model and apply it to the public teacher labor market. In particular, this model provides three testable hypotheses: optimal teacher effort levels decline with experience all things equal, optimal effort declines with tenure at a particular school, and teachers shirk as incentives collapse at the end of a teacher’s career or tenure. Usi...

Optimal Effort Incentives in Dynamic Tournaments

Optimal effort incentives in dynamic tournaments

This paper analyzes two-stage rank-order tournaments. A principal decides (i) how to spread prize money across the two periods, (ii) how to weigh performance in the two periods when awarding the second-period prize, and (iii) whether to reveal performance after the first period. The information revelation policy depends exclusively on properties of the effort cost function. The principal always...