Optimal Cost Targets and Incentives for Acquiring Expertise

Optimal Cost Targets and Incentives for Acquiring Expertise This paper studies the optimal choice of cost standards (or cost targets) over time in an agency setting in which a worker is responsible for both implementing actions and acquiring skill/expertise that would enable him to improve his future performance with respect to those actions. We characterize the effect of the decision horizon and the observability of the worker's acquired expertise on both the optimal path of cost standards and the worker's investments in expertise. In addition, we characterize the trade-off between motivating the worker's investment in expertise and motivating his efficient use of the expertise. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Optimal Cost Targets and Incentives for Acquiring Expertise

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Publisher
Springer Journals
Copyright
Copyright © 1998 by Kluwer Academic Publishers
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1023/A:1009625322822
Publisher site
See Article on Publisher Site

Abstract

This paper studies the optimal choice of cost standards (or cost targets) over time in an agency setting in which a worker is responsible for both implementing actions and acquiring skill/expertise that would enable him to improve his future performance with respect to those actions. We characterize the effect of the decision horizon and the observability of the worker's acquired expertise on both the optimal path of cost standards and the worker's investments in expertise. In addition, we characterize the trade-off between motivating the worker's investment in expertise and motivating his efficient use of the expertise.

Journal

Review of Accounting StudiesSpringer Journals

Published: Oct 6, 2004

References

  • Organizational Learning Curves: Persistence, Transfer and Turnover
    Argote, L.

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