IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Learning-by-employing: the value of commitment

  • Camargo, Braz Ministério de
  • Pastorino, Elena

We analyze a dynamic principal–agent model where an infinitely-lived principal faces a sequence of finitely-lived agents who differ in their ability to produce output. The ability of an agent is initially unknown to both him and the principal. An agent’s effort affects the information on ability that is conveyed by performance. We characterize the equilibrium contracts and show that they display short–term commitment to employment when the impact of effort on output is persistent but delayed. By providing insurance against early termination, commitment encourages agents to exert effort, and thus improves on the principal’s ability to identify their talent. We argue that this helps explain the use of probationary appointments in environments in which there exists uncertainty about individual ability. Keywords: dynamic principal–agent model, learning, commitment.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://bibliotecadigital.fgv.br/dspace/bitstream/10438/6693/1/TD+219+-+Braz+Camargo%3B+Elena+Pastorino.pdf
Download Restriction: no

Paper provided by Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil) in its series Textos para discussão with number 219.

as
in new window

Length:
Date of creation: 24 Jun 2010
Date of revision:
Handle: RePEc:fgv:eesptd:219
Contact details of provider: Postal: Rua Itapeva, 474, 13o andar, CEP 01332-000, São Paulo - SP
Phone: 55 (011) 3799-3350
Fax: 55 (011) 3799-3357
Web page: http://eesp.fgv.brEmail:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. O'Flaherty, B. & Siow, A., 1990. "Up or Out Rules in the Market for Lawers," University of Chicago - Economics Research Center 90-10, Chicago - Economics Research Center.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fgv:eesptd:219. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Núcleo de Computação da EPGE)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.