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Ex Ante versus Ex Post Optimal Promotion Rules: The Case of Internal Promotion

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  • Michael Waldman

    (Johnson Graduate School of Management, Cornell University, Ithaca, NY 14853.)

Abstract

A firm deciding on its promotion practices will be concerned both with the efficient assignment of workers to tasks and with rewarding prior performance. This can result in a time-inconsistency problem because the promotion rule that is optimal at the time of the promotion decision may differ from the rule that is optimal before performance is determined. In this article I explore the role of time inconsistency in determining promotion practices. In particular, I show that the common practice of favoring internal candidates for promotion can be understood as a response by firms to the problem of time inconsistency. Copyright 2003, Oxford University Press.

Suggested Citation

  • Michael Waldman, 2003. "Ex Ante versus Ex Post Optimal Promotion Rules: The Case of Internal Promotion," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 27-41, January.
    • Handle: RePEc:oup:ecinqu:v:41:y:2003:i:1:p:27-41
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