Abstract

https://ssrn.com/abstract=2497622
 


 



The Credibility of Performance Feedback in Tournaments


Ivan Marinovic


Stanford Graduate School of Business

September 17, 2014

Rock Center for Corporate Governance at Stanford University Working Paper No. 193

Abstract:     
This paper studies the effect of performance feedback on tournament outcomes, when a possibly dishonest principal may manipulate the agents' expectations to stimulate their effort. Under plausible circumstances, an increase in the principal's propensity to tell the truth (i.e., integrity) induces a mean preserving spread in the distribution of effort and leads to a decrease in expected profits and welfare. More generally, I identify conditions under which a lower integrity can improve the effectiveness of financial incentives in inducing the agents' effort, thus leading to higher expected profits for the principal.

Number of Pages in PDF File: 42

Keywords: Tournaments, Cheap-Talk, Contracts

JEL Classification: D82, D83, D84


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Date posted: September 19, 2014  

Suggested Citation

Marinovic, Ivan, The Credibility of Performance Feedback in Tournaments (September 17, 2014). Rock Center for Corporate Governance at Stanford University Working Paper No. 193. Available at SSRN: https://ssrn.com/abstract=2497622

Contact Information

Ivan Marinovic (Contact Author)
Stanford Graduate School of Business ( email )
655 Knight Way
Stanford, CA 94305-5015
United States

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