Incentive Mechanism Design Aiming at Deflated Performance Manipulation in Retail Firms: Based on the Ratchet Effect and the Reputation Effect
Joint Authors
Luo, Biao
Wang, Chengyuan
Li, ChunYi
Source
Mathematical Problems in Engineering
Issue
Vol. 2016, Issue 2016 (31 Dec. 2016), pp.1-9, 9 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2016-09-18
Country of Publication
Egypt
No. of Pages
9
Main Subjects
Abstract EN
Store managers in retail firms are often offered a performance-based compensation scheme accompanied with a performance target by the headquarters.
The headquarters adjusts the performance target based on store managers’ historical performance and therefore generates the ratchet effect.
Consequently, store managers may downward manipulate performance, that is, deflated performance manipulation, so as to weasel out of target growth and smooth performance growth.
However, the reputation effect that seeks fame by store managers can restrain deflated performance manipulation.
We model a dynamic agency setting in which both the ratchet effect and the reputation effect are related to the store manager’s compensation scheme, and the store manager has to balance her effort and deflated performance manipulation.
Our findings reveal that the ratchet effect and environmental volatility jointly determine the existence of deflated performance manipulation, yet the reputation effect can restrain it with increasing environmental volatility.
In addition, deflated performance manipulation is inevitable when environmental volatility is large enough, and explicit incentives may promote deflated performance manipulation.
American Psychological Association (APA)
Luo, Biao& Wang, Chengyuan& Li, ChunYi. 2016. Incentive Mechanism Design Aiming at Deflated Performance Manipulation in Retail Firms: Based on the Ratchet Effect and the Reputation Effect. Mathematical Problems in Engineering،Vol. 2016, no. 2016, pp.1-9.
https://search.emarefa.net/detail/BIM-1112321
Modern Language Association (MLA)
Luo, Biao…[et al.]. Incentive Mechanism Design Aiming at Deflated Performance Manipulation in Retail Firms: Based on the Ratchet Effect and the Reputation Effect. Mathematical Problems in Engineering No. 2016 (2016), pp.1-9.
https://search.emarefa.net/detail/BIM-1112321
American Medical Association (AMA)
Luo, Biao& Wang, Chengyuan& Li, ChunYi. Incentive Mechanism Design Aiming at Deflated Performance Manipulation in Retail Firms: Based on the Ratchet Effect and the Reputation Effect. Mathematical Problems in Engineering. 2016. Vol. 2016, no. 2016, pp.1-9.
https://search.emarefa.net/detail/BIM-1112321
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1112321