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Performance Feedback with Career Concerns

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  • Stephen E. Hansen

Abstract

This article examines the incentive effects of interim performance evaluation when a worker has career concerns and effort is history dependent. Disclosure has two effects: it increases the variance of future effort, and it allows the worker to use current effort to influence his employer's belief about future effort, creating a ratchet effect. The article provides necessary and sufficient conditions for full disclosure to dominate no disclosure; shows that the optimal disclosure policy reveals output realizations in the center of the distribution, but not in the tails; and discusses the potential implications of the results for the analysis of performance appraisal systems. (JEL D82, D86, L20) The Author 2012. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oup.com, Oxford University Press.

Suggested Citation

  • Stephen E. Hansen, 2013. "Performance Feedback with Career Concerns," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(6), pages 1279-1316, December.
    • Handle: RePEc:oup:jleorg:v:29:y:2013:i:6:p:1279-1316
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    File URL: http://hdl.handle.net/10.1093/jleo/ews032
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    Citations

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    Cited by:

    1. Klein, Arnd Heinrich & Schmutzler, Armin, 2017. "Optimal effort incentives in dynamic tournaments," Games and Economic Behavior, Elsevier, vol. 103(C), pages 199-224.
    2. Alex Smolin, 2021. "Dynamic Evaluation Design," American Economic Journal: Microeconomics, American Economic Association, vol. 13(4), pages 300-331, November.
    3. Hakenes, Hendrik & Katolnik, Svetlana, 2017. "On the incentive effects of job rotation," European Economic Review, Elsevier, vol. 98(C), pages 424-441.
    4. Mengxi Zhang, 2019. "When the principal knows better than the agent: Subjective evaluations as an optimal disclosure mechanism," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(4), pages 631-655, November.
    5. Habibi, Amir, 2020. "Motivation and information design," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 1-18.
    6. Chen, Bin R., 2015. "Subjective performance feedback, ability attribution, and renegotiation-proof contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 155-174.
    7. Johannes Hörner & Nicolas S Lambert, 2021. "Motivational Ratings [Toward the Next Generation of Recommender Systems: A Survey of the State-of-the-Art and Possible Extensions]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(4), pages 1892-1935.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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