Unlocking Optimal Incentives: Solving Commitment Problems for Corporate Success
In a situation where both the boss and the worker can affect the outcome, it's important to create fair incentive plans for both. When only the total output is considered, the best outcome is not always possible. However, in a repeated scenario, a better solution can be reached by using trigger strategies based on a shared signal. This can lead to the best possible result for both parties. This approach can be useful in corporate governance.