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Career concerns incentives: An experimental test

  • Koch, Alexander K.
  • Morgenstern, Albrecht
  • Raab, Philippe

Holmström's [Holmström, B., 1982/1999. Managerial incentive problems: a dynamic perspective. Review of Economic Studies 66, 169-182. Originally published in: Essays in Economics and Management in Honour of Lars Wahlbeck, Helsinki] career concerns model has become a workhorse for analyzing agency issues in many fields. The underlying signal jamming argument requires players to use information in a Bayesian way, which is difficult to directly test with field data: typically little is known about the information that individuals base their decisions on. Our laboratory experiment provides prima facie evidence: (i) the signal jamming mechanism successfully creates incentives on the labor supply side; (ii) decision errors take time to decrease; (iii) while subjects' average beliefs are remarkably consistent with play, a mild winner's curse arises on the labor demand side.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 72 (2009)
Issue (Month): 1 (October)
Pages: 571-588

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Handle: RePEc:eee:jeborg:v:72:y:2009:i:1:p:571-588
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