Holmström’s (1982/99) career concerns model has become an important workhorse for the analysis of agency issues in many fields. The underlying signal jamming argument requires players to use information in a Bayesian way – which may or may not reasonably approximate real-life decision makers’ behavior. Testing this theory with field data is difficult since typically little is known about the information that individuals base their decisions on, and this explains the dearth of empirical studies. We provide experimental evidence that the signal jamming mechanism works in a laboratory setting. Moreover, subjects’ beliefs fit remarkably well requirements imposed by the Bayesian equilibrium concept.
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Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number
bgse20_2004.
Length: 28 Date of creation: Nov 2004 Date of revision: Handle: RePEc:bon:bonedp:bgse20_2004
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Find related papers by JEL classification: C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
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