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Optimal Design of Peer Review and Self-Assessment Schemes

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  • Baliga, Sandeep
  • Sjostrom, Tomas

Abstract

A principal must decide whether or not to implement a project that originated with one of her employees. Several employees have information about the quality of the project. A successfully implemented project raises the inventor's chance of promotion, at his peer's expense, but a failed project ruins the inventor's career. An employee who has a relatively good reputation (and therefore is happy with the status quo) must be encouraged to promote new ideas. An employee who has a relatively bad reputation (and therefore wants to change the status quo) must be prevented from exaggerating the quality of new ideas. We study incentive-compatible and renegotiation-proof mechanisms, and we find that self-assessment (without any peer reports) is optimal. Copyright 2001 by the RAND Corporation.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 32 (2001)
Issue (Month): 1 (Spring)
Pages: 27-51

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Handle: RePEc:rje:randje:v:32:y:2001:i:1:p:27-51

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References

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  1. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
  2. Milgrom, Paul R., 1987. "employment contracts, influence activities and efficient organization design," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt6pf6c5j6, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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  4. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(3), pages 561-80, June.
  5. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
  6. Calvo, Guillermo A & Wellisz, Stanislaw, 1979. "Hierarchy, Ability, and Income Distribution," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(5), pages 991-1010, October.
  7. Steven D. Levitt, 1995. "Optimal Incentive Schemes When Only the Agents' "Best" Output Matters to the Principal," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 26(4), pages 744-760, Winter.
  8. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, Econometric Society, vol. 59(3), pages 611-36, May.
  9. Steven D. Levitt & Christopher M. Snyder, 1997. "Is No. News Bad News? Information Transmission and the Role of "Early Warning" in the Principal-Agent Model," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 28(4), pages 641-661, Winter.
  10. Sandeep Baliga & Tomas Sjostrom, 1997. "Not Invented Here," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1797, Harvard - Institute of Economic Research.
  11. Julio J. Rotemberg & Garth Saloner, 1995. "Overt Interfunctional Conflict (and its Reduction Through Business Strategy)," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 26(4), pages 630-653, Winter.
  12. Prendergast, Canice & Stole, Lars, 1996. "Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(6), pages 1105-34, December.
  13. Carmichael, H Lorne, 1988. "Incentives in Academics: Why Is There Tenure?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(3), pages 453-72, June.
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Cited by:
  1. Jim Engle-Warnick & Andreas Leibbrandt, 2006. "Who Gets The Last Word? An Experimental Study Of The Effect Of A Peer Review Process On The Expression Of Social Norms," Departmental Working Papers, McGill University, Department of Economics 2006-11, McGill University, Department of Economics.
  2. Andreas Roider, 2006. "Delegation of Authority as an Optimal (In)Complete Contract," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 162(3), pages 391-411, September.
  3. Dilip Mookherjee, 2006. "Decentralization, Hierarchies, and Incentives: A Mechanism Design Perspective," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 44(2), pages 367-390, June.
  4. Marx, Leslie M. & Squintani, Francesco, 2009. "Individual accountability in teams," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 72(1), pages 260-273, October.
  5. Noriyuki Yanagawa, 2008. "Biased Motivation of Experts: Should They be Aggressive or Conservative?," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-585, CIRJE, Faculty of Economics, University of Tokyo.
  6. Tamada, Yasunari & Tsai, Tsung-Sheng, 2007. "Optimal organization in a sequential investment problem with the principal's cancellation option," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 25(3), pages 631-641, June.
  7. Tamada, Yasunari & Tsai, Tsung-Sheng, 2014. "Delegating the decision-making authority to terminate a sequential project," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 99(C), pages 178-194.
  8. Carrillo, Juan D., 2003. "Job assignments as a screening device," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 21(6), pages 881-905, June.
  9. Noriyuki Yanagawa, 2008. "Biased Motivation of Experts: Should They be Aggressive or Conservative?," CARF F-Series, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo CARF-F-133, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  10. Johnson, Justin P., 2006. "Collaboration, peer review and open source software," Information Economics and Policy, Elsevier, Elsevier, vol. 18(4), pages 477-497, November.
  11. Jonathan Treussard, 2005. "Life-Cycle Consumption Plans and Portfolio Policies in a Heath-Jarrow-Morton Economy," Boston University - Department of Economics - Working Papers Series, Boston University - Department of Economics WP2005-033, Boston University - Department of Economics.
  12. Gromb, Denis & Martimort, David, 2007. "Collusion and the organization of delegated expertise," Journal of Economic Theory, Elsevier, Elsevier, vol. 137(1), pages 271-299, November.

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