Information Management and Incentives

24 Pages Posted: 10 Jan 2013

See all articles by Julia Nafziger

Julia Nafziger

Aarhus University - School of Business and Social Sciences

Heiner Schumacher

KU Leuven - Faculty of Business and Economics (FEB)

Date Written: Spring 2013

Abstract

We ask how the incentives of an agent are affected by an information management system that lets the agent receive information about the performance of a colleague before (“transparent firm”) rather than after he provides effort (“nontransparent firm”). Transparency is detrimental for incentives if the performance of the colleague provides information on the relative impact of the agent’s effort on his success probability. The findings imply that firms in which comparisons between employees play a minor role for compensation are transparent. Firms in which they play a major role sometimes choose to be nontransparent despite the flexibility gains transparency provides.

Suggested Citation

Nafziger, Julia and Schumacher, Heiner, Information Management and Incentives (Spring 2013). Journal of Economics & Management Strategy, Vol. 22, Issue 1, pp. 140-163, 2013. Available at SSRN: https://ssrn.com/abstract=2198767 or http://dx.doi.org/10.1111/jems.12006

Julia Nafziger

Aarhus University - School of Business and Social Sciences ( email )

Fuglesangs Allee 4
Aarhus V, DK 8210
Denmark

HOME PAGE: http://https://sites.google.com/site/julianafziger/

Heiner Schumacher

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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