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When Promotions Induce Good Managers to Be Lazy

  • Renucci, Antoine
  • Loss, Frédéric

In our context, a good-reputation manager favors risk when being perceived as good allows to be promoted while risk is observable but not verifiable. Indeed, it renders more difficult the learning process regarding her talent. In turn, this lowers her level of effort since the extent to which effort impacts the perception the market has about her talent is lessened. We show how and when monitoring helps employers restore incentives to work. By contrast, career concerns discipline a bad-reputation manager in our context, provided that promotions are sufficiently attractive. These results hold when two managers of heterogeneous reputation compete for one position.

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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/4126.

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Date of creation: 2004
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Publication status: Published in Cahiers de recherche Cereg, 2004
Handle: RePEc:dau:papers:123456789/4126
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