Performance Evaluations and Efficient Sorting
47 Pages Posted: 28 Feb 2007
There are 2 versions of this paper
Performance Evaluations and Efficient Sorting
Performance Evaluations and Efficient Sorting
Abstract
Much of the production in firms takes place over time. This paper seeks to understand the value of interim performance information on long projects. In particular, the model explores the sorting effects of performance evaluations. Conducting an interim performance evaluation increases efficiency by providing the option to end projects with low early returns. The main result: it is efficient to allocate more resources towards the end of a project. This result holds under a variety of scenarios: when the worker has unknown ability, when the outside options vary with output, and even under an agency framework with a risk-averse agent.
Keywords: Performance measurement, sorting, performance evaluation
JEL Classification: M40, M46, G31, D82
Suggested Citation: Suggested Citation
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