The Benefits of Limited Feedback in Organizations
In most ﬁrms, managers periodically assess workers performance. Evidence suggests that managers with hold 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 employers 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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