Biased Contests and Moral Hazard: Implications for Career Profiles

Margaret Meyer

Annals of Economics and Statistics, 1992, issue 25-26, 165-187

Abstract: We study the design of a sequence of two contests between a pair of identical risk averse employees whose effort choices are private information. It is optimal for the organization to "bias" the second contest in favor of the early winner--the reduction in second-period incentives is outweighed by the increase in first-period incentives. Thus, even though first-period success reflects only transitory shocks and not ability, it is efficient to structure the contests so these shocks have persistent effects on employees' careers.

Date: 1992
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Working Paper: Biased Contests and Moral Hazard: Implications for Career Profiles (1992)
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:1992:i:25-26:p:165-187

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