Belief Precision and Effort Incentives in Promotion Contests

TY - JOUR

T1 - Belief Precision and Effort Incentives in Promotion Contests

AU - Miklós-Thal, Jeanine

AU - Ullrich, Hannes

PY - 2015/12/1

Y1 - 2015/12/1

N2 - The career concerns literature predicts that incentives for effort decline as beliefs about ability become more precise (Holmström, 1982, 1999). In contrast, we show that effort can increase with belief precision when agents compete for promotions to better paid jobs that are assigned on the basis of perceived abilities. In this case, an intermediate level of precision provides the strongest incentive for effort, with effort increasing (decreasing) when beliefs are less (more) precise.

AB - The career concerns literature predicts that incentives for effort decline as beliefs about ability become more precise (Holmström, 1982, 1999). In contrast, we show that effort can increase with belief precision when agents compete for promotions to better paid jobs that are assigned on the basis of perceived abilities. In this case, an intermediate level of precision provides the strongest incentive for effort, with effort increasing (decreasing) when beliefs are less (more) precise.

UR - http://www.scopus.com/inward/record.url?scp=84954448200&partnerID=8YFLogxK

U2 - 10.1111/ecoj.12162

DO - 10.1111/ecoj.12162

M3 - Journal article

AN - SCOPUS:84954448200

SN - 0013-0133

VL - 125

SP - 1952

EP - 1963

JO - The Economic Journal

JF - The Economic Journal

IS - 589

ER -