Role of Relative and Absolute Performance Evaluations in Intergroup Competition

Hitoshi Matsushima

No CIRJE-F-727, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: We investigate the moral hazard problem in which a principal delegates multiple tasks to multiple workers. The principal imperfectly monitors their action choices by observing the public signals that are correlated with each other through a macro shock. He divides the workers into two groups and makes them compete with each other. We show that when the number of tasks is sufficiently large, relative performance evaluation between the groups accompanied with absolute performance evaluation results in eliminating unwanted equilibria. In this case, any approximate Nash equilibrium nearly induces the first-best allocation.

Pages: 18pages
Date: 2010-03
New Economics Papers: this item is included in nep-cta
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http://www.cirje.e.u-tokyo.ac.jp/research/dp/2010/2010cf727.pdf (application/pdf)

Related works:
Journal Article: ROLE OF RELATIVE AND ABSOLUTE PERFORMANCE EVALUATIONS IN INTERGROUP COMPETITION (2010)
Working Paper: Role of Relative and Absolute Performance Evaluations in Intergroup Competition (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2010cf727

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