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Managers as administrators: Reputation and incentives

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  • Dasgupta, Amil
  • Sarafidis, Yianis
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    Abstract

    In many firms managers play the role of administrators, adding value by successfully implementing solutions to problems that the firm may face. We model the career concerns of administrators. When administrators receive the same information but differ in their administrative abilities, we show that they may not choose tasks that are appropriate for the problems they face. In particular, in any pure strategy equilibrium of our model, administrators do not condition their behavior on any of their private information, despite the fact that they are risk neutral and know their administrative ability. We thus identify a novel source of incentive conflicts in firms. We also examine the robustness of these results to various extensions.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 70 (2009)
    Issue (Month): 1-2 (May)
    Pages: 155-163

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    Handle: RePEc:eee:jeborg:v:70:y:2009:i:1-2:p:155-163

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    Web page: http://www.elsevier.com/locate/jebo

    Related research

    Keywords: Incentive conflicts Career concerns Reputation Conformism;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Jeffrey Ely & Drew Fudenberg & David K. Levine, 2004. "When is Reputation Bad?," Harvard Institute of Economic Research Working Papers 2035, Harvard - Institute of Economic Research.
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      • Jeffrey C. Ely & Juuso Valimaki, 2002. "Bad Reputation," Discussion Papers 1348, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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    17. Dasgupta, Amil & Prat, Andrea, 2008. "Information aggregation in financial markets with career concerns," Journal of Economic Theory, Elsevier, vol. 143(1), pages 83-113, November.
    18. Sobel, Joel, 1985. "A Theory of Credibility," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 557-73, October.
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    Cited by:
    1. Singell, Larry D. & Tang, Hui-Hsuan, 2013. "Pomp and circumstance: University presidents and the role of human capital in determining who leads U.S. research institutions," Economics of Education Review, Elsevier, vol. 32(C), pages 219-233.

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