Big Fish in Small (and Big) Ponds: A Study of Careers

Jed DeVaro, Oliver Gürtler, Marc Gürtler and Christian Deutscher

The Journal of Law, Economics, and Organization, 2024, vol. 40, issue 1, 76-107

Abstract: Talented, ambitious workers (big fish) often join highly competitive organizations (big ponds), though they sometimes instead choose less competitive organizations (small ponds) offering brighter promotion prospects. Big fish exist in both types of organizations, though average worker ability is higher in big ponds. Top executives enjoy higher wages in big ponds. Choosing a big pond allows workers to signal high ability. Workers sometimes overestimate or underestimate their abilities, choosing the wrong pond. Big ponds tend to be larger in total employment. All of the preceding phenomena are shown to be consistent with equilibrium in a new theoretical model of careers. (JEL J24, M53)

Date: 2024
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