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Career concerns incentives: An experimental test

Author

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  • Alexander K. Koch
  • Albrecht Morgenstern
  • Philippe Raab

    () (School of Economics and Management, University of Aarhus, Denmark)

Abstract

Holmström’s (1982/99) 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.

Suggested Citation

  • Alexander K. Koch & Albrecht Morgenstern & Philippe Raab, 2009. "Career concerns incentives: An experimental test," Economics Working Papers 2009-01, Department of Economics and Business Economics, Aarhus University.
  • Handle: RePEc:aah:aarhec:2009-01
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    References listed on IDEAS

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    Cited by:

    1. Frederiksen, Anders, 2013. "Incentives and earnings growth," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 97-107.
    2. 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.
    3. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, Elsevier.
    4. Hannes Ullrich, 2014. "Leistungsanreize in Unternehmen," DIW Roundup: Politik im Fokus 32, DIW Berlin, German Institute for Economic Research.
    5. Blanco, Mariana & Engelmann, Dirk & Koch, Alexander K. & Normann, Hans-Theo, 2014. "Preferences and beliefs in a sequential social dilemma: a within-subjects analysis," Games and Economic Behavior, Elsevier, vol. 87(C), pages 122-135.
    6. Andreas Roider & Andrea Voskort, 2015. "Reputational Herding in Financial Markets: A Laboratory Experiment," CESifo Working Paper Series 5162, CESifo Group Munich.
    7. Frederiksen, Anders, 2010. "Earnings Progression, Human Capital and Incentives: Theory and Evidence," IZA Discussion Papers 4863, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    Incentives; Reputation; Career concerns; Signal jamming; Experiments;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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