Discussion Paper
Relational Contracts with Subjective Peer Evaluations
We study optimal contracting in a setting where a firm repeatedly interacts with multiple workers, and can compensate them based on publicly available performance signals as well as privately reported peer evaluations. If the evaluation and the effort provision are done by different workers (as in a supervisor/agent hierarchy), we show that, using both the private and public signals, the first best can be achieved even in a static setting.