Overstatement and rational market expectation
When an agent overstates his/her true performance, a rational market can still correctly guess the true performance. This paper shows, however, that such rational market expectation and a profit-maximizing principal can exacerbate the lack of productive effort by the agent.
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References listed on IDEAS
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- Stein, Jeremy C, 1989. "Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 655-69, November.
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- Lacker, J.M., 1989. "Optimal Contracts Under Costly State Falsification," Purdue University Economics Working Papers 956, Purdue University, Department of Economics.
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