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The Role of Verifiability and Privacy in the Strategic Provision of Performance Feedback: Theory and Experimental Evidence

Author

Listed:
  • Seda Ertac

    () (Department of Economics, Koç University)

  • Levent Kockesen

    () (Department of Economics, Koç University)

  • Duygu Ozdemir

    () (Institute for Social and Economic Research, University of Essex)

Abstract

We theoretically and experimentally analyze the role of verifiability and privacy in strategic performance feedback using a “one principal-two agent” context with real effort. We confirm the theoretical prediction that information transmission occurs only in verifiable feedback mechanisms and private-verifiable feedback is the most informative mechanism. Yet, subjects also exhibit some behavior that cannot be explained by our baseline model, such as telling the truth even when this will definitely hurt them, interpreting “no feedback” more optimistically than they should, and being influenced by feedback given to the other agent. We show that a model with individual-specific lying costs and naive agents can account for some, but not all, of these findings. We conclude that in addition to being naive, some agents also suffer from self-serving biases and engage in non-Bayesian social comparisons in their interpretation of performance feedback.

Suggested Citation

  • Seda Ertac & Levent Kockesen & Duygu Ozdemir, 2015. "The Role of Verifiability and Privacy in the Strategic Provision of Performance Feedback: Theory and Experimental Evidence," Koç University-TUSIAD Economic Research Forum Working Papers 1524, Koc University-TUSIAD Economic Research Forum.
  • Handle: RePEc:koc:wpaper:1524
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    References listed on IDEAS

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    Keywords

    Lab experiments; Performance feedback; Strategic communication; Cheap talk; Persuasion; Multiple audiences; Lying.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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