Career Concerns and Market Structure

Alessandro Bonatti and Johannes Hörner

No 1831R, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper analyzes the impact of market structure on career concerns. Effort increases the probability that a skilled agent achieves a one-time breakthrough. Wages are based on assessed ability and on expected output. For any wage, the agent works too little, too late. Under short-term contracts, effort and wages are single-peaked with seniority, due to the strategic substitutability of effort levels at different times. Both delay and underprovision of effort worsen if effort is observable. Commitment to wages by competing firms mitigates these inefficiencies. In that case, the optimal contract features piecewise constant wages and severance pay.

Keywords: Career concerns; Experimentation; Career paths; Up-or-out; Reputation (search for similar items in EconPapers)
JEL-codes: D82 D83 M52 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2011-10, Revised 2013-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Career Concerns and Market Structure (2014)
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