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Optimal Design of Peer Review and Self-Assessment Schemes

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  • Sandeep Baliga
  • Tomas Sjostrom

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

Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1290.

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Date of creation: Sep 1999
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Handle: RePEc:nwu:cmsems:1290

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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
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Web page: http://www.kellogg.northwestern.edu/research/math/
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References

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  1. Julio J. Rotemberg & Garth Saloner, 1995. "Overt Interfunctional Conflict (and its Reduction Through Business Strategy)," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 630-653, Winter.
  2. Paul R. Milgrom., 1987. "Employment Contracts, Influence Activities and Efficient Organization Design," Economics Working Papers 8741, University of California at Berkeley.
  3. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Sandeep Baliga & Tomas Sjostrom, 1997. "Not Invented Here," Harvard Institute of Economic Research Working Papers 1797, Harvard - Institute of Economic Research.
    • Sandeep Baliga & Tomas Sjostrom, 1997. "Not Invented Here," Discussion Papers 1213, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Prendergast, Canice & Stole, Lars, 1996. "Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1105-34, December.
  6. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
  7. Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 169-82, January.
  8. Carmichael, H Lorne, 1988. "Incentives in Academics: Why Is There Tenure?," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 453-72, June.
  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, vol. 28(4), pages 641-661, Winter.
  10. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-36, May.
  11. Canice Prendergast & Robert H. Topel, 1993. "Favoritism in Organizations," NBER Working Papers 4427, National Bureau of Economic Research, Inc.
  12. Steven D. Levitt, 1995. "Optimal Incentive Schemes When Only the Agents' "Best" Output Matters to the Principal," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 744-760, Winter.
  13. Calvo, Guillermo A & Wellisz, Stanislaw, 1979. "Hierarchy, Ability, and Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 991-1010, October.
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Cited by:
  1. Tamada, Yasunari & Tsai, Tsung-Sheng, 2014. "Delegating the decision-making authority to terminate a sequential project," Journal of Economic Behavior & Organization, Elsevier, vol. 99(C), pages 178-194.
  2. Noriyuki Yanagawa, 2008. "Biased Motivation of Experts: Should They be Aggressive or Conservative?," CIRJE F-Series CIRJE-F-585, CIRJE, Faculty of Economics, University of Tokyo.
  3. Johnson, Justin P., 2006. "Collaboration, peer review and open source software," Information Economics and Policy, Elsevier, vol. 18(4), pages 477-497, November.
  4. Dilip Mookherjee, 2006. "Decentralization, Hierarchies, and Incentives: A Mechanism Design Perspective," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 367-390, June.
  5. Gromb, Denis & Martimort, David, 2007. "Collusion and the organization of delegated expertise," Journal of Economic Theory, Elsevier, vol. 137(1), pages 271-299, November.
  6. Andreas Roider, 2003. "Delegation of Authority as an Optimal (In)complete Contract," Bonn Econ Discussion Papers bgse8_2003, University of Bonn, Germany, revised Aug 2004.
  7. Carrillo, Juan D., 2003. "Job assignments as a screening device," International Journal of Industrial Organization, Elsevier, vol. 21(6), pages 881-905, June.
  8. 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 2006-11, McGill University, Department of Economics.
  9. Marx, Leslie M. & Squintani, Francesco, 2009. "Individual accountability in teams," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 260-273, October.
  10. Jonathan Treussard, 2005. "Life-Cycle Consumption Plans and Portfolio Policies in a Heath-Jarrow-Morton Economy," Boston University - Department of Economics - Working Papers Series WP2005-033, Boston University - Department of Economics.
  11. Noriyuki Yanagawa, 2008. "Biased Motivation of Experts: Should They be Aggressive or Conservative?," CARF F-Series CARF-F-133, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  12. 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, vol. 25(3), pages 631-641, June.

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