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Subjective Evaluations with Performance Feedback

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  • Jan Zabojnik

    ()
    (Queen's University)

Abstract

This paper models two key roles of subjective performance evaluations: their incentive role and their feedback role. The paper shows that the feedback role makes subjective pay feasible even without repeated interaction, as long as there exists some verifiable measure of performance. It also shows that while subjective pay is helpful, it cannot achieve full efficiency. However, fully efficient incentives are achievable if the firm can commit to a forced distribution of evaluations and employs a continuum of workers. With a small number of workers, a forced distribution is valuable only if the verifiable measure is poor.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1283.pdf
File Function: First version 2011
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Bibliographic Info

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1283.

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Length: 44 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:qed:wpaper:1283

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Related research

Keywords: Subjective Evaluations; Performance Feedback; Optimal Contracts;

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References

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  1. William Fuchs, 2005. "Contracting with Repeated Moral Hazard and Private Evaluations," Discussion Papers 04-012, Stanford Institute for Economic Policy Research.
  2. Aoyagi, Masaki, 2010. "Information feedback in a dynamic tournament," Games and Economic Behavior, Elsevier, vol. 70(2), pages 242-260, November.
  3. Florian Ederer, 2010. "Feedback and Motivation in Dynamic Tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(3), pages 733-769, 09.
  4. Rachel M. Hayes & Scott Schaefer, 2000. "Implicit Contracts and the Explanatory Power of Top Executive Compensation for Future Performance," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 273-293, Summer.
  5. Suvorov, Anton & van de Ven, Jeroen, 2009. "Discretionary rewards as a feedback mechanism," Games and Economic Behavior, Elsevier, vol. 67(2), pages 665-681, November.
  6. Maria Goltsman & Arijit Mukherjee, 2011. "Interim Performance Feedback in Multistage Tournaments: The Optimality of Partial Disclosure," Journal of Labor Economics, University of Chicago Press, vol. 29(2), pages 229 - 265.
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Citations

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Cited by:
  1. Fuchs, William, 2013. "Subjective Evaluations: Discretionary Bonuses and Feedback Credibility," IZA Discussion Papers 7758, Institute for the Study of Labor (IZA).
  2. Miriam Schütte & Philipp Christoph Wichardt, 2013. "Delegation and Interim Performance Evaluation," CESifo Working Paper Series 4193, CESifo Group Munich.

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