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Information Management and Incentives

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  • Julia Nafziger
  • Heiner Schumacher

Abstract

We ask how the incentives of an agent are affected by an information management system that lets the agent receive information about the performance of a colleague before (“transparent firm”) rather than after he provides effort (“nontransparent firm”). Transparency is detrimental for incentives if the performance of the colleague provides information on the relative impact of the agent’s effort on his success probability. The findings imply that firms in which comparisons between employees play a minor role for compensation are transparent. Firms in which they play a major role sometimes choose to be nontransparent despite the flexibility gains transparency provides.

Suggested Citation

  • Julia Nafziger & Heiner Schumacher, 2013. "Information Management and Incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(1), pages 140-163, March.
    • Handle: RePEc:bla:jemstr:v:22:y:2013:i:1:p:140-163
    DOI: jems.12006
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    Cited by:

    1. Shanglyu Deng & Hanming Fang & Qiang Fu & Zenan Wu, 2020. "Confidence Management in Tournaments," NBER Working Papers 27186, National Bureau of Economic Research, Inc.
    2. Nafziger, Julia, 2009. "Timing of information in agency problems with hidden actions," Journal of Mathematical Economics, Elsevier, vol. 45(11), pages 751-766, December.

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