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Mixed up? that's good for motivation

Author

Listed:
  • Eloïc Peyrache

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

Abstract

We show that career concerns can arise in the absence of ex ante uncertainty about an agent's type, if his unobservable actions influence future productivity. Implementing effort in mixed strategies allows the principal to endogenously introduce uncertainty about the agent's ex post productivity and generate reputational incentives. Creating such ambiguity can be optimal for the principal, even though this exposes the agent to additional risk and reduces output. This finding for an environment with imperfect commitment contrasts with standard agency models, where implementing mixed strategy actions typically is not optimal if pure strategies can also be implemented.

Suggested Citation

  • Eloïc Peyrache, 2008. "Mixed up? that's good for motivation," Post-Print hal-00463444, HAL.
    • Handle: RePEc:hal:journl:hal-00463444
    DOI: 10.1007/s00199-007-0206-y
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    Cited by:

    1. Alexander K. Koch & Eloïc Peyrache, 2011. "Aligning Ambition and Incentives," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 27(3), pages 655-688.

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