Role of Relative and Absolute Performance Evaluations in Intergroup Competition
AbstractWe investigate the moral hazard problem in which a principal delegates multiple tasks to multiple workers. The principal imperfectly monitors their action choices by observing the public signals that are correlated with each other through a macro shock. He divides the workers into two groups and makes them compete with each other. We show that when the number of tasks is sufficiently large, relative performance evaluation between the groups accompanied with absolute performance evaluation results in eliminating unwanted equilibria. In this case, any approximate Nash equilibrium nearly induces the first-best allocation.
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Bibliographic InfoPaper provided by Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo in its series CARF F-Series with number CARF-F-213.
Length: 18 pages
Date of creation: Mar 2010
Date of revision:
Other versions of this item:
- Hitoshi Matsushima, 2010. "Role Of Relative And Absolute Performance Evaluations In Intergroup Competition," The Japanese Economic Review, Japanese Economic Association, vol. 61(4), pages 443-454, December.
- Hitoshi Matsushima, 2010. "Role of Relative and Absolute Performance Evaluations in Intergroup Competition," CIRJE F-Series CIRJE-F-727, CIRJE, Faculty of Economics, University of Tokyo.
- D20 - Microeconomics - - Production and Organizations - - - General
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
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