Heterogeneous Beliefs and Management Control System

2017 Fiscal Year Final Research Report

• Project/Area Number: 16H07173
• Research Category: Grant-in-Aid for Research Activity Start-up
• Allocation Type: Single-year Grants
• Research Field: Accounting
• Research Institution: Keio University
• Principal Investigator: KIMURA Taichi 慶應義塾大学, 経営管理研究科(日吉), 助教 (10779771)
• Project Period (FY): 2016-08-26 – 2018-03-31
• Keywords: マネジメント・コントロール / 信念の異質性 / LENフレームワーク

Outline of Final Research Achievements

Beliefs play a crucial role when making decisions. A firm is composed of heterogeneous people. Thus, a manager has to face with various employees with heterogeneous beliefs. If managers and employees have different beliefs about the working environment, employees may not act as intended by their managers. This paper studies how to control an employee who disagrees with a manager about a contracting environment. We introduce the heterogeneity of the players' beliefs about the working environment into the standard single-agent LEN-setting moral hazard model. Our research found that the incentive rate and the manager's expected utility increase with the employee's optimism when the manager and the employee disagree on the working environment. However, if the employee is too optimistic and the manager is too pessimistic, the manager does not offer a contract to the employee.

Free Research Field

マネジメント・コントロール