Timeliness, Accuracy, and Relevance in Dynamic Incentive Contracts

Abstract

The present study began with Jerry Feltham’s invitation to present at the Stanford Summer Camp in August 2003. As we were variously involved in related work on performance measurement and dynamic incentives, Peter, Jerry, Christian, and Florin teamed up and the result was Christensen, Feltham, Hofmann, and Sabac (2003). The present study is an update of the unpublished Stanford Summer Camp version dated July 3, 2003. The 2003 manuscript was a team effort under Jerry’s guidance, the current update was completed by Christian and Florin.

Keywords: Dynamic incentives, Performance measure precision, contract renegotiation

JEL Classification: M40, M52, D86