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Experimenting with Career Concerns

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  • Halac, Marina
  • Kremer, Ilan

Abstract

A manager who learns privately about a project over time may want to delay quitting it if recognizing failure/lack of success hurts his reputation. In the banking industry, managers may want to roll over bad loans. How do distortions depend on expected project quality? What are the effects of releasing public information about quality? A key feature of banks is that they learn about project quality from bad news, i.e. a default. We show that in such an environment, distortions tend to increase with expected quality and imperfect information about quality. Results differ if managers instead learn from good news.

Suggested Citation

  • Halac, Marina & Kremer, Ilan, 2018. "Experimenting with Career Concerns," CEPR Discussion Papers 12569, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12569
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    References listed on IDEAS

    as
    1. Mira Frick & Yuhta Ishii, 2015. "Innovation Adoption by Forward-Looking Social Learners," Cowles Foundation Discussion Papers 1877, Cowles Foundation for Research in Economics, Yale University.
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    4. Caroline D. Thomas, "undated". "Career Concerns and Policy Intransigence - A Dynamic Signalling Model," Department of Economics Working Papers 161228, The University of Texas at Austin, Department of Economics, revised Dec 2016.
    5. Simon Board & Moritz Meyer‐ter‐Vehn, 2013. "Reputation for Quality," Econometrica, Econometric Society, vol. 81(6), pages 2381-2462, November.
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    Cited by:

    1. Thomas, Caroline, 2019. "Experimentation with reputation concerns – Dynamic signalling with changing types," Journal of Economic Theory, Elsevier, vol. 179(C), pages 366-415.
    2. Binswanger, Johannes & Oechslin, Manuel, 2020. "Better statistics, better economic policies?," European Economic Review, Elsevier, vol. 130(C).
    3. Khalil, Fahad & Lawarree, Jacques & Rodivilov, Alexander, 2020. "Learning from failures: Optimal contracts for experimentation and production," Journal of Economic Theory, Elsevier, vol. 190(C).

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    More about this item

    Keywords

    bad loans; banks; career concerns; Dynamic games; private learning; strategic experimentation;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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