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Career concerns in a simple experimental labour market

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  • Irlenbusch, Bernd
  • Sliwka, Dirk

Abstract

We experimentally investigate a simple version of Holmström’s career concerns model in which firms compete for agents in two consecutive periods. Profits of firms are determined by agents’ unknown ability and the effort they choose. Before making second-period wage offers firms are informed about first-period profits. In a different treatment firms additionally learn the abilities of agents. Theory suggests high first-period equilibrium effort in the hidden ability treatment but no effort elsewhere. However, we find that effort is significantly higher in the revealed ability treatment and therefore conclude that transparency does not weaken, but strengthen career concerns incentives.
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  • Irlenbusch, Bernd & Sliwka, Dirk, 2006. "Career concerns in a simple experimental labour market," European Economic Review, Elsevier, vol. 50(1), pages 147-170, January.
    • Handle: RePEc:eee:eecrev:v:50:y:2006:i:1:p:147-170
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    Cited by:

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    3. Brandes, Leif & Franck, Egon, 2012. "Social preferences or personal career concerns? Field evidence on positive and negative reciprocity in the workplace," Journal of Economic Psychology, Elsevier, vol. 33(5), pages 925-939.
    4. Elena Katok & Enno Siemsen, 2011. "Why Genius Leads to Adversity: Experimental Evidence on the Reputational Effects of Task Difficulty Choices," Management Science, INFORMS, vol. 57(6), pages 1042-1054, June.
    5. Sebastian Fehrler & Niall Hughes, 2018. "How Transparency Kills Information Aggregation: Theory and Experiment," American Economic Journal: Microeconomics, American Economic Association, vol. 10(1), pages 181-209, February.
    6. Koch, Alexander K. & Morgenstern, Albrecht & Raab, Philippe, 2004. "An Experimental Test of Career Concerns," IZA Discussion Papers 1405, Institute of Labor Economics (IZA).
    7. Frederiksen, Anders, 2013. "Incentives and earnings growth," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 97-107.
    8. Andreas Roider & Andrea Voskort, 2016. "Reputational Herding in Financial Markets: A Laboratory Experiment," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 17(3), pages 244-266, July.
    9. Koch, Alexander K. & Morgenstern, Albrecht & Raab, Philippe, 2009. "Career concerns incentives: An experimental test," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 571-588, October.
    10. Debrah Meloso & Salvatore Nunnari & Marco Ottaviani, 2023. "Looking into Crystal Balls: A Laboratory Experiment on Reputational Cheap Talk," Management Science, INFORMS, vol. 69(9), pages 5112-5127, September.
    11. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 3, pages 229-330, Elsevier.
    12. Gürtler, Marc & Gürtler, Oliver, 2014. "The interaction of explicit and implicit contracts: A signaling approach," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 135-146.
    13. Hong, Fuhai & Hossain, Tanjim & List, John A., 2015. "Framing manipulations in contests: A natural field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 118(C), pages 372-382.
    14. Lea Heursen & Svenja Friess & Marina Chugunova, 2023. "Reputational Concerns and Advice-Seeking at Work," Rationality and Competition Discussion Paper Series 447, CRC TRR 190 Rationality and Competition.
    15. Frederiksen, Anders, 2010. "Earnings Progression, Human Capital and Incentives: Theory and Evidence," IZA Discussion Papers 4863, Institute of Labor Economics (IZA).

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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