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Career Concerns and Incentive Compatible Task Design

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Listed:
  • Masaki Aoyagi
  • Maxime Menuet

Abstract

This paper studies the optimal disclosure of information about an agent’s talent when it consists of two components. The agent observes the first component of his talent as his private type, and reports it to a principal to perform a task which reveals the second component of his talent. Based on the report and performance, the principal discloses information to a firm who pays the agent the wage equal to his expected talent. We study incentive compatible disclosure rules that minimize the mismatch between the agent’s true talent and his wage. The optimal rule entails full disclosure when the agent’s talent is a supermodular function of the two components, but entails partial pooling when it is submodular. Under a mild degree of submodularity, we show that the optimal disclosure rule is obtained as a solution to a linear programming problem, and identify the number of messages required under the optimal rule. We relate it to the agent’s incentive compatibility conditions, and show that each pooling message has binary support.

Suggested Citation

  • Masaki Aoyagi & Maxime Menuet, 2024. "Career Concerns and Incentive Compatible Task Design," ISER Discussion Paper 1232, Institute of Social and Economic Research, The University of Osaka.
    • Handle: RePEc:dpr:wpaper:1232
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    File URL: https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/2024/DP1232.pdf
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    References listed on IDEAS

    as
    1. Anton Kolotilin & Alexander Wolitzky, 2020. "Assortative Information Disclosure," Discussion Papers 2020-08, School of Economics, The University of New South Wales.
    2. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 183-198.
    3. Valentina Dolce & Federica Emanuel & Maurizio Cisi & Chiara Ghislieri, 2020. "The soft skills of accounting graduates: perceptions versus expectations," Accounting Education, Taylor & Francis Journals, vol. 29(1), pages 57-76, January.
    4. Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 183-198.
    Full references (including those not matched with items on IDEAS)

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