The Credibility of Performance Feedback in Tournaments

24 Pages Posted: 13 Feb 2015

See all articles by Ivan Marinovic

Ivan Marinovic

Graduate School of Business, Stanford University

Multiple version iconThere are 2 versions of this paper

Date Written: Spring 2015

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.

Suggested Citation

Marinovic, Ivan, The Credibility of Performance Feedback in Tournaments (Spring 2015). Journal of Economics & Management Strategy, Vol. 24, Issue 1, pp. 165-188, 2015. Available at SSRN: https://ssrn.com/abstract=2564807 or http://dx.doi.org/10.1111/jems.12086

Ivan Marinovic (Contact Author)

Graduate School of Business, Stanford University ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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