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The Credibility of Performance Feedback in Tournaments

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  • Iván Marinovic

Abstract

This paper studies the effect of performance feedback on tournament outcomes, when a possibly dishonest principal may manipulate the agents' expectations to stimulate their effort. Under plausible circumstances, an increase in the principal's propensity to tell the truth (i.e., integrity) induces a mean preserving spread in the distribution of effort and leads to a decrease in expected profits and welfare. More generally, I identify conditions under which a lower integrity can improve the effectiveness of financial incentives in inducing the agents' effort, thus leading to higher expected profits for the principal.

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  • Iván Marinovic, 2015. "The Credibility of Performance Feedback in Tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(1), pages 165-188, March.
    • Handle: RePEc:bla:jemstr:v:24:y:2015:i:1:p:165-188
    DOI: 10.1111/jems.12086
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    References listed on IDEAS

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    Cited by:

    1. Cédric Gutierrez & Tomasz Obloj & Douglas H. Frank, 2021. "Better to have led and lost than never to have led at all? Lost leadership and effort provision in dynamic tournaments," Strategic Management Journal, Wiley Blackwell, vol. 42(4), pages 774-801, April.
    2. Peter-J. Jost, 2021. "“The ball is round, the game lasts 90 minutes, everything else is pure theoryâ€," Journal of Sports Economics, , vol. 22(1), pages 27-74, January.
    3. Xie, Jun, 2015. "CEO career concerns and investment efficiency: Evidence from China," Emerging Markets Review, Elsevier, vol. 24(C), pages 149-159.
    4. Jürgen Mihm & Jochen Schlapp, 2019. "Sourcing Innovation: On Feedback in Contests," Management Science, INFORMS, vol. 65(2), pages 559-576, February.
    5. Brendan Daley & Ruoyu Wang, 2018. "When to Release Feedback in a Dynamic Tournament," Decision Analysis, INFORMS, vol. 15(1), pages 11-26, March.

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