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Contingency exigency

Contingency exigency Contingency Exigency DANIEL REEVES Beeminder Lawyers and debt collectors are classic examples of people you hire on contingency. The idea is to hire someone with payment contingent on the fruits of their labor. You don ™t pay them if you don ™t win, i.e., if you yourself don ™t get paid. And if you luck out, they share in the windfall. The agency problem here is insurmountable. If you pay them hourly then they have incentive to drag things out. If you pay them a percentage of the winnings then, unless the percentage is unreasonably high, you have the opposite problem: they ™ll have incentive to skimp on the time they put in. So we ™ll ignore the incentives and assume that this agent1 will conscientiously put in exactly as much time as they would if they were you. The question: What ™s a fair payment function? We ™ll take fairness to mean that your agent earns in expectation exactly what they would ™ve earned had you paid a straight hourly rate for their time. Assume that you and your agent agree on what that non-contingency rate, r, would be, and also that you agree on the probability http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png ACM SIGecom Exchanges Association for Computing Machinery

Contingency exigency

ACM SIGecom Exchanges , Volume 10 (3) – Dec 1, 2011

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Publisher
Association for Computing Machinery
Copyright
Copyright © 2011 by ACM Inc.
ISSN
1551-9031
DOI
10.1145/2325702.2325711
Publisher site
See Article on Publisher Site

Abstract

Contingency Exigency DANIEL REEVES Beeminder Lawyers and debt collectors are classic examples of people you hire on contingency. The idea is to hire someone with payment contingent on the fruits of their labor. You don ™t pay them if you don ™t win, i.e., if you yourself don ™t get paid. And if you luck out, they share in the windfall. The agency problem here is insurmountable. If you pay them hourly then they have incentive to drag things out. If you pay them a percentage of the winnings then, unless the percentage is unreasonably high, you have the opposite problem: they ™ll have incentive to skimp on the time they put in. So we ™ll ignore the incentives and assume that this agent1 will conscientiously put in exactly as much time as they would if they were you. The question: What ™s a fair payment function? We ™ll take fairness to mean that your agent earns in expectation exactly what they would ™ve earned had you paid a straight hourly rate for their time. Assume that you and your agent agree on what that non-contingency rate, r, would be, and also that you agree on the probability

Journal

ACM SIGecom ExchangesAssociation for Computing Machinery

Published: Dec 1, 2011

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