Noisy and Subjective Performance Measure in Promotion Tournaments

Seoul Journal of Economics, Vol. 25, No. 2, pp. 207-221, 2012

16 Pages Posted: 14 Jun 2012

Date Written: May 30, 2012

Abstract

This paper considers both incentive and sorting effects of a promotion tournament, and analyzes the optimal degree of uncertainty in the agents' performance measure. In a subjective promotion tournament where the winner is determined by the principal's belief about the agents' ability, this paper shows that a noisy performance measure can have a positive incentive effect and a negative sorting effect. Therefore, it can be optimal for the principal to intentionally choose a noisy performance measure.

Keywords: noisy performance measure, subjective tournament, sorting

JEL Classification: D82, D86, M52

Suggested Citation

Kwon, Illoong, Noisy and Subjective Performance Measure in Promotion Tournaments (May 30, 2012). Seoul Journal of Economics, Vol. 25, No. 2, pp. 207-221, 2012. Available at SSRN: https://ssrn.com/abstract=2083902

Illoong Kwon (Contact Author)

Seoul National University ( email )

Graduate School of Public Administration
599 Gwanak-ro
Gwanak-gu, Seoul 151-742
Korea, Republic of (South Korea)
82-2-880-8551 (Phone)
82-2-877-2411 (Fax)

HOME PAGE: http://www.albany.edu/~ik325357/

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