Performance measure congruity in linear agency models with interactive tasks.
SFB/TR 15 Discussion Paper No. 204
This note demonstrates how performance measure congruity and noise determine an agency’s total surplus within an linear agency framework with multiple tasks. It provides a decomposition of agency costs, leading back to a congruity index previously proposed in the literature. In addition, it generalizes this index to a more general cost function, thereby highlighting the context specificity of the original criterion. Finally, it suggests a redefinition of tasks under which the criterion prevails.