Performance cycles

David Lagziel and Ehud Lehrer ()
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Ehud Lehrer: Durham University

Economic Theory, 2024, vol. 77, issue 4, No 5, 999-1024

Abstract: Abstract A decision maker repeatedly exerts efforts to produce new outputs, while being compensated based on his past and current production levels. We show that the decision maker’s optimal strategy dictates a cyclic oscillatory performance whenever the compensation depends on recent past performance. We apply our model to various economic settings such as the delegated portfolio-managers problem, an R &D investment problem, and a dynamic advertising problem.

Keywords: Performance cycles; Performance persistence; Dynamic optimization (search for similar items in EconPapers)
JEL-codes: C61 C62 C79 (search for similar items in EconPapers)
Date: 2024
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Working Paper: PERFORMANCE CYCLES (2018)
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DOI: 10.1007/s00199-023-01516-x

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