Peter O. Christensen
University of Southern Denmark
Gerald A. Feltham
University of British Columbia
Christian Hoffmann
University of Hanover
Florin Sabac
University of Alberta
Abstract: This paper examines incentives within a multi-period LEN model with time-additive preferences and consumption smoothing. Both full-commitment and renegotiation-proof contracts are considered. The agent's consumption planning horizon may extend beyond his compensation horizon, which may extend beyond his retirement. The timing of the performance measures is demonstrated to have a significant effect on the principal's expected payoff, and the effect depends significantly on whether there is full commitment, or renegotiation.
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