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

Elisabetta Iossa and Patrick Rey

No 757, IDEI Working Papers from Institut d'Économie Industrielle (IDEI), Toulouse

Abstract: We study how career concerns affect the dynamics of incentives in a multi-period contract, when the agent’s productivity can evolve exogenously (random shocks) or improve endogenously through 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; contract duration; contract renewal; reputation and dynamic incentives (search for similar items in EconPapers)
Date: 2012-11
New Economics Papers: this item is included in nep-bec, nep-cta, nep-hrm, nep-mic and nep-ppm
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Related works:
Journal Article: BUILDING REPUTATION FOR CONTRACT RENEWAL: IMPLICATIONS FOR PERFORMANCE DYNAMICS AND CONTRACT DURATION (2014) Downloads
Working Paper: Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration (2013) Downloads
Working Paper: Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration (2012) Downloads
Working Paper: Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration (2010) Downloads
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