Formal Contract and Relational Contract during the Incentive Process
Zhiguo Li · Industrial Economics Research · 2007
Two contractual methods are analyzed to solve incentive problems.Formal contract is based on multi-task model,and emphasizes on the conflictions between performance measure and output contribution.Relational contract is based on repeated game,and focuses on the contradiction between objective measure and subjective judgment.The combination of these two contractual methods will reduce both distortional incentive and reneging temptation during the incentive process.