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Subjective Evaluations with Performance Feedback

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  • Jan Zabojnik

    () (Queen's University)

Abstract

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.

Suggested Citation

  • Jan Zabojnik, 2011. "Subjective Evaluations with Performance Feedback," Working Papers 1283, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:1283
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    File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1283.pdf
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    References listed on IDEAS

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    Cited by:

    1. Delfgaauw, Josse & Souverijn, Michiel, 2016. "Biased supervision," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 107-125.
    2. William Fuchs, 2015. "Subjective Evaluations: Discretionary Bonuses and Feedback Credibility," American Economic Journal: Microeconomics, American Economic Association, vol. 7(1), pages 99-108, February.
    3. Helmut Bester & Johannes Münster, 2016. "Subjective evaluation versus public information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 61(4), pages 723-753, April.
    4. W. Bentley MacLeod & Teck Yong Tan, 2016. "Optimal Contracting with Subjective Evaluation: The Effects of Timing, Malfeasance and Guile," NBER Working Papers 22156, National Bureau of Economic Research, Inc.
    5. Miriam Schütte & Philipp Christoph Wichardt, 2013. "Delegation and Interim Performance Evaluation," CESifo Working Paper Series 4193, CESifo Group Munich.

    More about this item

    Keywords

    Subjective Evaluations; Performance Feedback; Optimal Contracts;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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