The benefits of limited feedback in organizations
AbstractIn most firms, managers periodically assess workers' performance. Evidence suggests that managers withhold information during these reviews, and some observers argue that this necessarily reduces surplus. This paper assesses the validity of this argument when workers have career concerns. Disclosure has two effects: it exposes the worker to uncertainty about future effort levels, but allows him to use current effort to influence his employer's beliefs about future effort. The surplus-maximizing disclosure policy reveals output realizations in the center of the distribution, but not in the tails. Thus, it is efficient for firms to reveal some but not all performance information.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1232.
Date of creation: Jul 2010
Date of revision:
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Web page: http://www.econ.upf.edu/
Performance Appraisal; Career Concerns; Incentives; Risk.;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
- M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executives; Executive Compensation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-18 (All new papers)
- NEP-BEC-2010-09-18 (Business Economics)
- NEP-CTA-2010-09-18 (Contract Theory & Applications)
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.:
- Arijit Mukherjee, 2008. "Career Concerns, Matching, And Optimal Disclosure Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1211-1250, November.
- Ghazala Azmat & Nagore Iriberri, 2010.
"The provision of relative performance feedback information: An experimental analysis of performance and happiness,"
Economics Working Papers
1216, Department of Economics and Business, Universitat Pompeu Fabra.
- Ghazala Azmat & Nagore Iriberri, 2012. "The Provision of Relative Performance Feedback Information: An Experimental Analysis of Performance and Happiness," CEP Discussion Papers dp1116, Centre for Economic Performance, LSE.
- Ghazala Azmat & Nagore Iriberri, 2010. "The Provision of Relative Performance Feedback Information: An Experimental Analysis of Performance and Happiness," Working Papers 454, Barcelona Graduate School of Economics.
- Gibbs, Michael, 2012. "Design and Implementation of Pay for Performance," IZA Discussion Papers 6322, Institute for the Study of Labor (IZA).
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