Dynamic Evaluation Design

Alex Smolin

MPRA Paper from University Library of Munich, Germany

Abstract: A principal owns a firm, hires an agent of uncertain productivity, and designs a dynamic policy for evaluating his performance. The agent observes ongoing evaluations and decides when to quit. While not quitting, the agent is paid a wage proportional to his perceived productivity; the principal claims the residual performance. After quitting, the agent secures a fixed safe payoff. I show that equilibrium evaluation policies are Pareto efficient and leave no rents to the agent. In a minimally informative equilibrium, for a broad class of performance technologies, the agent’s wage deterministically grows with tenure.

Keywords: evaluation; information design; career concerns; bandit experimentation; downward wage rigidity; up-or-out (search for similar items in EconPapers)
JEL-codes: C72 D82 D83 M52 (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Dynamic Evaluation Design (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:84133

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