Subjective Evaluations with Performance Feedback

Jan Zabojnik

No 274081, Queen's Economics Department Working Papers from Queen's University - Department of Economics

Abstract: This paper models two key roles of subjective performance evaluations: their in- centive role and their feedback role. The paper shows that the feedback role makes subjective pay feasible even without repeated interaction, as long as there exists some verifiable measure of performance. It also shows that while subjective pay is helpful, it cannot achieve full efficiency. However, fully efficient incentives are achievable if the firm can commit to a forced distribution of evaluations and employs a continuum of workers. With a small number of workers, a forced distribution is valuable only if the verifiable measure is poor.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 45
Date: 2011-11
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Persistent link: https://EconPapers.repec.org/RePEc:ags:quedwp:274081

DOI: 10.22004/ag.econ.274081

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