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
Date Written: November 17, 2015
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: Suggested Citation