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An Experimental Test of Career Concerns

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Author Info

  • Koch, Alexander K.

    ()
    (Aarhus University)

  • Morgenstern, Albrecht

    ()
    (Federal Ministry of Finance)

  • Raab, Philippe

    ()
    (Allianz Insurance Group)

Abstract

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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1405.

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Length: 28 pages
Date of creation: Nov 2004
Date of revision:
Publication status: published in: Journal of Economic Behavior and Organization , 2009, 72 (1), 571-588
Handle: RePEc:iza:izadps:dp1405

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Keywords: experiments; signal jamming; career concerns; reputation; incentives;

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  1. Ernst Fehr & Armin Falk, 2003. "Wage Rigidity in a Competitive Incomplete Contract Market," Labor and Demography 0305001, EconWPA.
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  10. Georg Kirchsteiger & Ernst Fehr & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," ULB Institutional Repository 2013/5927, ULB -- Universite Libre de Bruxelles.
  11. Irlenbusch, Bernd & Sliwka, Dirk, 2006. "Career concerns in a simple experimental labour market," European Economic Review, Elsevier, vol. 50(1), pages 147-170, January.
  12. Susanne Lohmann, 1998. "Rationalizing the Political Business Cycle: A Workhorse Model," Economics and Politics, Wiley Blackwell, vol. 10(1), pages 1-17, 03.
  13. Jordi Brandts & Gary Charness, 2004. "Do Labour Market Conditions Affect Gift Exchange? Some Experimental Evidence," Economic Journal, Royal Economic Society, vol. 114(497), pages 684-708, 07.
  14. Fehr, Ernst, et al, 1998. "When Social Norms Overpower Competition: Gift Exchange in Experimental Labor Markets," Journal of Labor Economics, University of Chicago Press, vol. 16(2), pages 324-51, April.
  15. Ben Lockwood & Eric Le Borgne, 2003. "Do Elections Always Motivate Incumbents? Experimentation vs. Career Concerns," IMF Working Papers 03/57, International Monetary Fund.
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