Reputation and Career Concerns
This paper studies Holmstrom's  seminal model of career concerns, but considers that a small change in the beliefs about the agent's future productivity may imply a large change in his compensation---because, for example, the agent may be fired or promoted. This allows us to study how the agent's effort decision depends on his current reputation---with reputation we refer to the beliefs about the agent's future productivity. We shall show that the market's and the agent's problems can be written recursively. We find that the relationship between the agent's decisions and his current reputation is typically nonmonotonic: equilibrium effort is hump-shaped over reputation. Furthermore, equilibrium effort may be higher if there is less dispersion in the distribution of abilities; it may be higher later in the agent's career; and it may be higher than the efficient effort level
|Date of creation:||03 Dec 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
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- Dan Bernhardt, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Oxford University Press, vol. 62(2), pages 315-339.
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- 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.
- Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The economics of career concerns: part 1 :comparing information structures," ULB Institutional Repository 2013/9617, ULB -- Universite Libre de Bruxelles.
- Robert Barro, 1973. "The control of politicians: An economic model," Public Choice, Springer, vol. 14(1), pages 19-42, March.
- Ehtisham Ahmad & Leonardo Martinez, 2004. "On the Design and Effectiveness of Targeted Expenditure Programs," IMF Working Papers 04/220, International Monetary Fund.
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