Career Concerns Incentives: An Experimental Test

Univ. of Aarhus Working Paper No. 2009-1

39 Pages Posted: 12 Jan 2009

See all articles by Alexander K. Koch

Alexander K. Koch

University of Aarhus - Department of Economics and Business Economics; IZA Institute of Labor Economics

Albrecht Morgenstern

German Federal Ministry of Finance; IZA Institute of Labor Economics

Philippe Raab

University of Bonn - Department of Economics; IZA Institute of Labor Economics

Date Written: January 9, 2009

Abstract

Holmstrom's (1982/99) career concerns model has become a workhorse for analyzing agency issues in many fields. The underlying signal jamming argument requires players to use information in a Bayesian way, which is difficult to directly test with field data: typically little is known about the information that individuals base their decisions on. Our laboratory experiment provides prima facie evidence: i) the signal jamming mechanism successfully creates incentives on the labor supply side; ii) decision errors take time to decrease; iii) while subjects' average beliefs are remarkably consistent with play, a mild winner's curse arises on the labor demand side.

Keywords: Incentives, Reputation, Career concerns, Signal jamming, Experiments

JEL Classification: C91, D83, L14

Suggested Citation

Koch, Alexander K. and Morgenstern, Albrecht and Raab, Philippe, Career Concerns Incentives: An Experimental Test (January 9, 2009). Univ. of Aarhus Working Paper No. 2009-1, Available at SSRN: https://ssrn.com/abstract=1325188 or http://dx.doi.org/10.2139/ssrn.1325188

Alexander K. Koch (Contact Author)

University of Aarhus - Department of Economics and Business Economics ( email )

Fuglesangs Allé 4
Aarhus V, 8210
Denmark

HOME PAGE: http://https://sites.google.com/site/alexanderkkoch/Home

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Albrecht Morgenstern

German Federal Ministry of Finance ( email )

Wilhelmstrasse 97
Berlin, 10117
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Philippe Raab

University of Bonn - Department of Economics ( email )

Adenauerallee 24-26
Bonn, D-53113
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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