Exact(1)
The optimal bonuses are expressed in terms of demand elasticities, service technology, and provider characteristics.
Similar(59)
It turns out that the structure of the optimal bonus schemes are rather simple with easily calculable parameters.
We also find that the optimal maximum bonus increases with volatility but decreases with the kurtosis parameter of the performance distribution.
The optimal contract and bonus are also derived explicitly if the insured is allowed to choose both of them.
For any pre-agreed bonus, the optimal insurance contract is given explicitly and shown to be either the full coverage contract when the insured pays high enough premium, or a deductible one otherwise.
If it was, wouldn't we expect that those who got tens of millions in annual bonuses would be optimal performers?
"We have shown that some form of bonus taxation in the financial sector is optimal above and beyond standard progressive income taxation," they conclude.
Therefore, participants were motivated to make optimal decisions, as that would maximize their chance of winning bonus money.
In this problem, the insured has to consider the so-called optimal action rather than the contracted compensation (or indemnity) due to the existence of the bonus.
The capital-constrained retailer can get an "information bonus" from late-purchasing only when its internal capital level is relatively low, so it needs a trade-off between the "conditional information bonus" and the "inevitable cost loss" brought by late-purchasing and then makes an optimal purchase timing decision.
Optimal contracting would lead you to expect a stock-option design that filtered out general rises in stock prices, so that bonuses were paid only for better-than-average performance against some relevant benchmark.
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