This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Mixed up? That's good for motivation

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Alexander K. Koch () (Department of Economics, Royal Holloway, University of London)
Eloic Peyrache () (HEC School of Management, Paris)

Additional information is available for the following registered author(s):

Abstract

An essential ingredient in models of career concerns is ex ante uncertainty about an agent’s type. This paper shows how career concerns can arise even in the absence of any such ex ante uncertainty, if the unobservable actions that an agent takes influence his future productivity. By implementing effort in mixed strategies the principal can endogenously induce uncertainty about the agent’s ex post productivity and generate reputational incentives. Our main result is that creating such ambiguity can be optimal for the principal, even though this exposes the agent to additional risk and reduces output. This finding demonstrates the importance of mixed strategies in contracting environments with imperfect commitment, which contrasts with standard agency models where implementing mixed strategy actions typically is not optimal if pure strategies are also implementable.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.rhul.ac.uk/economics/Research/WorkingPapers/pdf/dpe0422.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Department of Economics, Royal Holloway University of London in its series Royal Holloway, University of London: Discussion Papers in Economics with number 04/22.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 16 pages
Date of creation: Sep 2004
Date of revision: Sep 2004
Handle: RePEc:hol:holodi:0422

Contact details of provider:
Postal: Egham Hill, Egham, Surrey, TW20 0EX, UK.
Phone: +44 1784-414228
Fax: +44 1784-439534
Web page: http://www.rhul.ac.uk/economics/

Order Information:
Postal: Egham Hill, Egham, Surrey, TW20 0EX, UK.
Email:

For technical questions regarding this item, or to correct its listing, contact: (Claire Blackman).

Related research
Keywords: incentive contracts; reputation; mixed strategies.;

Other versions of this item:

Find related papers by JEL classification:
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executive Compensation

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:
  1. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law & Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
  2. Meyer, Margaret A & Vickers, John, 1995. "Performance Comparisons and Dynamic Incentives," CEPR Discussion Papers 1107, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Fahad Khalil, 1997. "Auditing Without Commitment," RAND Journal of Economics, The RAND Corporation, vol. 28(4), pages 629-640, Winter. [Downloadable!] (restricted)
  4. Fudenberg, Drew & Tirole, Jean, 1990. "Moral Hazard and Renegotiation in Agency Contracts," Econometrica, Econometric Society, vol. 58(6), pages 1279-1319, November. [Downloadable!] (restricted)
    Other versions:
  5. Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Blackwell Publishing, vol. 66(1), pages 183-98, January. [Downloadable!] (restricted)
  6. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  7. Shin Hyun Song, 1994. "The Burden of Proof in a Game of Persuasion," Journal of Economic Theory, Elsevier, vol. 64(1), pages 253-264, October. [Downloadable!] (restricted)
  8. Cremer, Jacques, 1995. "Arm's Length Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 275-95, May. [Downloadable!] (restricted)
  9. Laffont, Jean-Jacques & Tirole, Jean, 1988. "The Dynamics of Incentive Contracts," Econometrica, Econometric Society, vol. 56(5), pages 1153-75, September. [Downloadable!] (restricted)
    Other versions:
  10. Bester, Helmut & Strausz, Roland, 2001. "Contracting with Imperfect Commitment and the Revelation Principle: The Single Agent Case," Econometrica, Econometric Society, vol. 69(4), pages 1077-98, July.
  11. Emmanuelle Auriol & Guido Friebel & Lambros Pechlivanos, 2002. "Career Concerns in Teams," Journal of Labor Economics, University of Chicago Press, vol. 20(2), pages 289-307, Part. [Downloadable!]
  12. Borland, Jeff, 1992. " Career Concerns: Incentives and Endogenous Learning in Labour Markets," Journal of Economic Surveys, Blackwell Publishing, vol. 6(3), pages 251-70.
  13. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn. [Downloadable!] (restricted)
    Other versions:
  14. B. Douglas Bernheim & Michael D. Whinston, 1997. "Incomplete Contracts and Strategic Ambiguity," Harvard Institute of Economic Research Working Papers 1787, Harvard - Institute of Economic Research.
    Other versions:
  15. Koessler, Frederic, 2004. "Strategic knowledge sharing in Bayesian games," Games and Economic Behavior, Elsevier, vol. 48(2), pages 292-320, August. [Downloadable!] (restricted)
  16. John Fingleton, 2005. "Career Concerns of Bargainers," Journal of Law, Economics and Organization, Oxford University Press, vol. 21(1), pages 179-204, April. [Downloadable!] (restricted)
  17. Alexander K. Koch & Eloic Peyrache, 2005. "Aligning Ambition and Incentives," Royal Holloway, University of London: Discussion Papers in Economics 05/03, Department of Economics, Royal Holloway University of London, revised Mar 2005. [Downloadable!]
    Other versions:
Full references

Cited by:
(explanations, 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.)

  1. Alexander K. Koch & Eloïc Peyrache, 2008. "Aligning Ambition and Incentives," Economics Working Papers 2008-16, School of Economics and Management, University of Aarhus. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? There are over 21000 authors registered on RePEc Author Service.

This page was last updated on 2009-12-2.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.