Subjective Evaluations with Performance Feedback
This paper models two key roles of subjective performance evaluations: their incentive role and their feedback role. The paper shows that the feedback role makes subjective pay feasible even without repeated interaction, as long as there exists some verifiable measure of performance. It also shows that while subjective pay is helpful, it cannot achieve full efficiency. However, fully efficient incentives are achievable if the firm can commit to a forced distribution of evaluations and employs a continuum of workers. With a small number of workers, a forced distribution is valuable only if the verifiable measure is poor.
|Date of creation:||Nov 2011|
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- Masaki Aoyagi, 2003.
"Information Feedback in a Dynamic Tournament,"
ISER Discussion Paper
0580, Institute of Social and Economic Research, Osaka University.
- William Fuchs, 2005.
"Contracting with Repeated Moral Hazard and Private Evaluations,"
Game Theory and Information
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- William Fuchs, 2005. "Contracting with Repeated Moral Hazard and Private Evaluations," 2005 Meeting Papers 431, Society for Economic Dynamics.
- Maria Goltsman & Arijit Mukherjee, 2011. "Interim Performance Feedback in Multistage Tournaments: The Optimality of Partial Disclosure," Journal of Labor Economics, University of Chicago Press, vol. 29(2), pages 229 - 265.
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- Rachel M. Hayes & Scott Schaefer, 2000. "Implicit Contracts and the Explanatory Power of Top Executive Compensation for Future Performance," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 273-293, Summer.
- Suvorov, Anton & van de Ven, Jeroen, 2009. "Discretionary rewards as a feedback mechanism," Games and Economic Behavior, Elsevier, vol. 67(2), pages 665-681, November.
- Florian Ederer, 2010. "Feedback and Motivation in Dynamic Tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(3), pages 733-769, 09.
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