Biaised Information and Effort

Julie Rosaz ()

No 1025, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: We study the impact of information manipulation by a principal on the agent’s effort. In a context of asymmetric information at the principal’s advantage, we test experimentally the principal’s willingness to bias (overestimate or under-estimate) the information she gives to her agent on his ability in order to motivate him to exert more effort. We find that i) principals do bias information, ii) agents trust the cheap-talk messages they receive and adjust their effort accordingly. Therefore, biased messages improve both the agent’s performance and thus the principal’s profit. This, however, does not increase efficiency. We also find that over-estimation occurs much more often than under-estimation. Making the signal costly in an additional treatment reduces this effect.

Keywords: information; feedback; bias; motivation; experiment (search for similar items in EconPapers)
JEL-codes: C92 D83 M12 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2010
New Economics Papers: this item is included in nep-cbe, nep-cta and nep-mic
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ftp://ftp.gate.cnrs.fr/RePEc/2010/1025.pdf (application/pdf)

Related works:
Journal Article: BIASED INFORMATION AND EFFORT (2012)
Working Paper: Biased Information and Effort (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:gat:wpaper:1025

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