The Quality of Information and Incentives for Effort

Hebrew University Working Paper No. 2005-01

24 Pages Posted: 20 Jan 2005

See all articles by Omer Moav

Omer Moav

University of Warwick - Department of Economics; Centre for Economic Policy Research (CEPR)

Zvika Neeman

Tel Aviv University - Eitan Berglas School of Economics; Boston University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 2005

Abstract

We study the relationship between the precision of information about the performance of an agent in a market, and the incentives this agent has for exerting effort to produce high quality. We show that this relationship is not monotonic. There exists a threshold beyond which any further improvement in the precision of information weakens the agent's incentive to produce high quality. Accordingly, both very precise and very imprecise information about the agent's performance may destroy its incentive to exert effort. A few applications of this result are discussed.

Keywords: Reputation, incentives, precision of information, experience good, credence good

JEL Classification: D82, L15

Suggested Citation

Moav, Omer and Neeman, Zvika, The Quality of Information and Incentives for Effort (January 2005). Hebrew University Working Paper No. 2005-01. Available at SSRN: https://ssrn.com/abstract=651204 or http://dx.doi.org/10.2139/ssrn.651204

Omer Moav

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

HOME PAGE: http://www2.warwick.ac.uk/fac/soc/economics/staff/academic/moav

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Zvika Neeman (Contact Author)

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel

HOME PAGE: http://www.tau.ac.il/~zvika/

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-3184 (Phone)
617-353-4449 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
183
Abstract Views
1,209
rank
160,904
PlumX Metrics