Communicating Subjective Evaluations

Matthias Lang

No 2012_14, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: Consider managers evaluating their employees’ performance. Should managers justify their subjective evaluations? To answer this question, I study justifications: Suppose a manager’s evaluation is private information. To justify her evaluation, she can gather additional information that allows the agent to partially cross-check the evaluation. I show that the manager justifies her evaluation if and only if the evaluation indicates bad performance. The justification assures the employee that the manager has not distorted the evaluation downwards. For good performances, however, the manager pays a constant high wage without justification. Empirical literature demonstrates that subjective evaluations discriminate poorly between good performances. This pattern was attributed to biased managers. I show that these effects occur in optimal contracts without any biased behavior.

Keywords: Communication; Justification; Subjective Evaluation; Information Acquisition; Centrality; Leniency; Disclosure (search for similar items in EconPapers)
JEL-codes: D82 D86 J41 M52 (search for similar items in EconPapers)
Date: 2012-06, Revised 2018-04
New Economics Papers: this item is included in nep-cta 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: Communicating subjective evaluations (2019)
Working Paper: Communicating subjective evaluations (2019)
Working Paper: Communicating Subjective Evaluations (2018)
Working Paper: Communicating Subjective Evaluations (2014)
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