Suchergebnisse

AbstractWe study monitoring in a continuous‐time career concerns model. A monitor oversees an agent and generates verifiable evidence if the agent shirks. The monitor's ability is uncertain and requires costly investment to maintain. Unpunished shirking reveals that the monitor is ineffective, which discourages the monitor from maintaining her ability. The agent shirks strategically to discourage the monitor, because shirking increases the rate of learning. Term limits reduce the incentive to shirk and long‐serving monitors accept bribes to hide evidence.

Holmström's (1982/99) career concerns model has become a workhorse for analyzing agency issues in many elds. The underlying signal jamming argument requires players to use information in a Bayesian way, which is difficult to directly test with eld data: typically little is known about the information that individuals base their decisions on. Our laboratory experiment provides prima facie evidence: i) the signal jamming mechanism successfully creates incentives on the labor supply side; ii) decision errors take time to decrease; iii) while subjects' average beliefs are remarkably consistent with play, a mild winner's curse arises on the labor demand side.

This paper presents a tractable model that allows us to study career concerns when the strength of a worker's incentives depends on his employment history. More specifically, the paper incorporates standard job assignments into the main model in Holmstrom (1999). Equilibrium wages, equilibrium job assignments, and the strength of career-concern incentives are the same for all employment histories that lead to the same worker's reputation. (With reputation we refer to beliefs about the worker's future productivity.) We show that, typically, workers with better reputation have stronger incentives than workers with worse reputation. Furthermore, we show that when the strength of incentives depends on employment history, (i) a ratchet effect may appear, (ii) in spite of this ratchet effect, incentives may be stronger, and (iii) incentives may be stronger when beliefs about ability are more precise.