Confidence Management in Tournaments
Hanming Fang (),
Qiang Fu () and
No 27186, NBER Working Papers from National Bureau of Economic Research, Inc
An incumbent employee competes against a new hire for bonus or promotion. The incumbent’s ability is commonly known, while that of the new hire is private information. The incumbent is subject to a perceptional bias: His prior about the new hire’s type differs from the true underlying distribution. He can be either ex ante overconfident or underconfident. We first explore whether a firm that aims to maximize aggregate effort would benefit or suffer from the bias. It is shown that debiasing may not be productive in incentivizing efforts. We then study the optimal information disclosure policy. The firm is allowed to ex ante commit to whether an informative signal—which allows the incumbent to infer the new hire’s type—will be disclosed publicly. We fully characterize the conditions under which transparency or opacity will prevail. We further take a Bayesian persuasion approach to optimally design the firm’s evaluation and feedback structure. We also consider an alternative context in which the manager is concerned about the expected winner’s effort. We demonstrate that the insights obtained from the baseline setting remain intact. Our results shed light on the extensive discussion of confidence management in firms and the debate about organizational transparency.
JEL-codes: D03 D2 D82 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
Note: IO PE PR
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.
Working Paper: Con?dence Management in Tournaments (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:27186
Ordering information: This working paper can be ordered from
The price is Paper copy available by mail.
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().