Favoritism in Organizations

JOURNAL OF POLITICAL ECONOMY, Vol. 104, No. 5, October 1996

Posted: 5 Sep 1996

See all articles by Canice Prendergast

Canice Prendergast

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Robert H. Topel

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

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Abstract

Objective measures of employee performance are rarely available. Instead, firms rely on subjective judgments by supervisors. Subjectivity opens the door to favoritism, where evaluators act on personal preferences toward subordinates to favor some employees over others. Firms must balance the costs of favoritism arbitrary rewards and less productive job assignments against supervisors' demands for authority over subordinates. We analyze the conditions under which favoritism is costly to organizations and the effects of favoritism on compensation, the optimal extent of authority and the use of bureaucratic rules.

JEL Classification: J53, M12

Suggested Citation

Prendergast, Canice and Topel, Robert H., Favoritism in Organizations. JOURNAL OF POLITICAL ECONOMY, Vol. 104, No. 5, October 1996. Available at SSRN: https://ssrn.com/abstract=3293

Canice Prendergast (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
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773-702-7309 (Phone)
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National Bureau of Economic Research (NBER)

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Robert H. Topel

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7524 (Phone)
773-702-2699 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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