{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,2,6]],"date-time":"2026-02-06T20:12:21Z","timestamp":1770408741626,"version":"3.49.0"},"reference-count":37,"publisher":"Institute for Operations Research and the Management Sciences (INFORMS)","issue":"2","content-domain":{"domain":[],"crossmark-restriction":false},"short-container-title":["Management Science"],"published-print":{"date-parts":[[2026,2]]},"abstract":"<jats:p>We analyze the effects of retaliation on optimal contracts in a hierarchy consisting of a principal, a monitor, and an agent. With probability m, the monitor observes a signal about the agent\u2019s effort and decides what to report to the principal. With probability [Formula: see text], the monitor only observes an uninformative default signal realization. The agent retaliates against the monitor and the principal whenever the monitor\u2019s report reduces the agent\u2019s payment from an endogenously determined default level. We show that the principal\u2019s optimal contracting problem can be divided into two steps: First is an information acquisition stage. The principal chooses how much retaliation to tolerate, and more retaliation generates more informative signals (in the Blackwell sense) about the agent\u2019s effort. Second, given the information acquired, the principal designs the optimal payment schemes, which pool moderately (potentially all) bad agent performances with the uninformative signal realization. The empirical literature documents that supervisors are reluctant to provide poor ratings and that performance reports are often inflated and compressed. We show that such a pattern in performance appraisals can arise as firms\u2019 optimal responses to retaliation concerns.<\/jats:p>\n                  <jats:p>This paper was accepted by Joshua Gans, business strategy.<\/jats:p>\n                  <jats:p>Supplemental Material: The data files are available at https:\/\/doi.org\/10.1287\/mnsc.2023.01226 .<\/jats:p>","DOI":"10.1287\/mnsc.2023.01226","type":"journal-article","created":{"date-parts":[[2025,6,10]],"date-time":"2025-06-10T09:57:08Z","timestamp":1749549428000},"page":"1410-1429","source":"Crossref","is-referenced-by-count":0,"title":["Monitoring, Performance Reviews, and Retaliation"],"prefix":"10.1287","volume":"72","author":[{"ORCID":"https:\/\/orcid.org\/0000-0001-5561-9095","authenticated-orcid":false,"given":"Henrique","family":"Castro-Pires","sequence":"first","affiliation":[{"name":"University of Miami, Coral Gables, Florida 33124"}],"role":[{"role":"author","vocabulary":"crossref"}]}],"member":"109","reference":[{"key":"B1","doi-asserted-by":"publisher","DOI":"10.1257\/0895330053147930"},{"key":"B2","doi-asserted-by":"publisher","DOI":"10.1016\/S0749-5978(02)00517-4"},{"key":"B3","doi-asserted-by":"publisher","DOI":"10.2308\/accr-10099"},{"key":"B4","doi-asserted-by":"publisher","DOI":"10.1287\/mnsc.2022.4501"},{"key":"B5","doi-asserted-by":"publisher","DOI":"10.1093\/jeea\/jvae003"},{"key":"B6","doi-asserted-by":"publisher","DOI":"10.1111\/j.1468-232X.2010.00614.x"},{"key":"B7","doi-asserted-by":"publisher","DOI":"10.1111\/1756-2171.12360"},{"key":"B8","doi-asserted-by":"publisher","DOI":"10.1093\/jeea\/jvab026"},{"key":"B9","doi-asserted-by":"publisher","DOI":"10.1111\/1756-2171.12116"},{"key":"B10","volume-title":"Human Resource Management","author":"Dessler G","year":"2000"},{"key":"B11","doi-asserted-by":"publisher","DOI":"10.1093\/restud\/rdw035"},{"key":"B12","doi-asserted-by":"publisher","DOI":"10.1016\/j.jebo.2016.12.016"},{"key":"B13","doi-asserted-by":"publisher","DOI":"10.1257\/aer.97.4.1432"},{"key":"B14","doi-asserted-by":"publisher","DOI":"10.2307\/1912246"},{"key":"B15","doi-asserted-by":"publisher","DOI":"10.1162\/qjec.2008.123.1.1"},{"key":"B16","doi-asserted-by":"publisher","DOI":"10.1287\/mnsc.2022.4418"},{"key":"B17","volume-title":"Merit Pay: Linking Pay Increases to Performance Ratings","author":"Heneman R","year":"1992"},{"key":"B18","doi-asserted-by":"publisher","DOI":"10.1257\/aer.100.5.2451"},{"key":"B19","doi-asserted-by":"publisher","DOI":"10.2307\/3003320"},{"key":"B20","doi-asserted-by":"publisher","DOI":"10.1016\/j.jet.2007.12.004"},{"key":"B21","doi-asserted-by":"publisher","DOI":"10.1086\/381479"},{"key":"B22","doi-asserted-by":"publisher","DOI":"10.4159\/9780674039773"},{"key":"B23","doi-asserted-by":"publisher","DOI":"10.1016\/j.jet.2018.10.012"},{"key":"B24","doi-asserted-by":"publisher","DOI":"10.3982\/TE3570"},{"key":"B25","doi-asserted-by":"publisher","DOI":"10.1257\/000282803322157115"},{"key":"B26","doi-asserted-by":"publisher","DOI":"10.1257\/000282803321455232"},{"key":"B27","doi-asserted-by":"publisher","DOI":"10.1257\/mic.4.3.34"},{"key":"B28","doi-asserted-by":"publisher","DOI":"10.1016\/j.geb.2014.05.015"},{"key":"B29","doi-asserted-by":"publisher","DOI":"10.1111\/j.1467-937X.2007.00461.x"},{"key":"B30","doi-asserted-by":"publisher","DOI":"10.1111\/1468-0262.00296"},{"key":"B31","doi-asserted-by":"publisher","DOI":"10.1111\/1467-937X.00075"},{"key":"B32","doi-asserted-by":"publisher","DOI":"10.1016\/j.jet.2013.09.011"},{"key":"B33","doi-asserted-by":"publisher","DOI":"10.1016\/0304-4068(82)90006-4"},{"key":"B34","doi-asserted-by":"publisher","DOI":"10.1037\/0021-9010.82.3.434"},{"key":"B35","volume-title":"Sabotage in the American Workplace: Anecdotes of Dissatisfaction, Mischief and Revenge","author":"Sprouse M","year":"1992"},{"key":"B36","volume-title":"Working: People Talk About What They Do All Day and How They Feel About What They Do","author":"Terkel S","year":"1972"},{"key":"B37","doi-asserted-by":"publisher","DOI":"10.1111\/1756-2171.12054"}],"container-title":["Management Science"],"original-title":[],"language":"en","link":[{"URL":"https:\/\/pubsonline.informs.org\/doi\/pdf\/10.1287\/mnsc.2023.01226","content-type":"unspecified","content-version":"vor","intended-application":"similarity-checking"}],"deposited":{"date-parts":[[2026,2,6]],"date-time":"2026-02-06T09:59:11Z","timestamp":1770371951000},"score":1,"resource":{"primary":{"URL":"https:\/\/pubsonline.informs.org\/doi\/10.1287\/mnsc.2023.01226"}},"subtitle":[],"short-title":[],"issued":{"date-parts":[[2026,2]]},"references-count":37,"journal-issue":{"issue":"2","published-print":{"date-parts":[[2026,2]]}},"alternative-id":["10.1287\/mnsc.2023.01226"],"URL":"https:\/\/doi.org\/10.1287\/mnsc.2023.01226","relation":{},"ISSN":["0025-1909","1526-5501"],"issn-type":[{"value":"0025-1909","type":"print"},{"value":"1526-5501","type":"electronic"}],"subject":[],"published":{"date-parts":[[2026,2]]}}}