Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration

Patrick Rey and Elisabetta Iossa

No 9571, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study how career concerns affect the dynamics of incentives in a multi-period contract, when the agent?s productivity is a stochastic function of his past productivity and investment. We show that incentives are stronger and performance is higher when the contract approaches its expiry date. Contrary to common wisdom, long-term contracts may strengthen reputational effects whereas short-term contracting may be optimal when investment has persistent, long-term effects.

Keywords: Career concerns; Career duration; Contract renewal; Reputation; Dynamic incentives (search for similar items in EconPapers)
JEL-codes: D21 D23 D86 L24 L51 (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-bec, nep-cta, nep-hrm and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: BUILDING REPUTATION FOR CONTRACT RENEWAL: IMPLICATIONS FOR PERFORMANCE DYNAMICS AND CONTRACT DURATION (2014)
Working Paper: Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration (2012)
Working Paper: Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration (2012)
Working Paper: Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration (2010)
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