REG510 Management Accounting: Incentive Mechanism
The focus is on performance measures and the relationship between performance and rewards. The case of linear rewards is addressed as well as the special case of stock prices as performance measures. Multiple tasks and multiple performance measures are discussed as well. Asymmetric information is then introduced by assuming that the agent has more information than the principal pre-contracting or post-contracting. Dynamic issues are the then discussed in the context of multi-period models. Here it is important to distinguish whether binding contracts may be written or renegotiations must be allowed. Finally contracting with multiple agents is addressed.
After completing the course a student will:
- Have an ability to model organizational behavior using microeconomic (principal-agent) theory
- Understand performance measures and the relationship between performance and rewards
- Have a good understanding of incentive contracting within firms
- Understand the tradeoff between risk sharing and incentives
- Have better understanding the theory of games with asymmetric information
Grading: Pass / fail.
Autumn. Currently not offered.
Textbook: Christensen P. O. and Feltham G. A., "Economics of Accounting Volume II: Performance Evaluation" Springer Science, 2005
- ECTS Credits
- Teaching language
Frøystein Gjesdal, Department of Accounting, Auditing and Law