Experimenting with Career Concerns

Marina Halac and Ilan Kremer

No 12569, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: A manager who learns privately about a project over time may want to delay quitting it if recognizing failure/lack of success hurts his reputation. In the banking industry, managers may want to roll over bad loans. How do distortions depend on expected project quality? What are the effects of releasing public information about quality? A key feature of banks is that they learn about project quality from bad news, i.e. a default. We show that in such an environment, distortions tend to increase with expected quality and imperfect information about quality. Results differ if managers instead learn from good news.

Keywords: Strategic experimentation; Dynamic games; Private learning; Banks; Bad loans; Career concerns (search for similar items in EconPapers)
JEL-codes: C73 D83 G21 (search for similar items in EconPapers)
Date: 2018-01
New Economics Papers: this item is included in nep-hrm and nep-mic
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Citations: View citations in EconPapers (2)

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Journal Article: Experimenting with Career Concerns (2020)
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