Biased Performance Evaluation in a Model of Career Concerns: Incentives versus Ex-Post Efficiency

51 Pages Posted: 18 Mar 2015 Last revised: 21 Nov 2015

See all articles by Sergey Stepanov

Sergey Stepanov

National Research University Higher School of Economics - Faculty of Economics; National Research University Higher School of Economics - International College of Economics and Finance

Date Written: November 17, 2015

Abstract

I study a career concerns model in which the principal receives information about the agent's performance from a possibly biased evaluator. The optimal bias solves the tradeoff between ex-post efficiency of the principal's decisions about the agent and incentive provision. It is "anti-agent" ("pro-agent") when the agent is of a high value (low value) for the principal from the ex-ante perspective. It increases with the strength of the agent's career concerns and decreases with the degree of uncertainty about his ability. Delegating decisions to the evaluator dominates communication with her when ex-ante efficiency calls for a sufficiently large bias.

Keywords: career concerns, performance evaluation, information transmission, biased intermediary, strategic delegation

JEL Classification: D82, D83, M51

Suggested Citation

Stepanov, Sergey, Biased Performance Evaluation in a Model of Career Concerns: Incentives versus Ex-Post Efficiency (November 17, 2015). Available at SSRN: https://ssrn.com/abstract=2579649 or http://dx.doi.org/10.2139/ssrn.2579649

Sergey Stepanov (Contact Author)

National Research University Higher School of Economics - Faculty of Economics ( email )

Shabolovka 26
Moscow, 119049
Russia

National Research University Higher School of Economics - International College of Economics and Finance ( email )

Pokrovski Bulvar 11, Korpus Zh, Office 715
Moscow, 109028
Russia

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