Belief Precision and Effort Incentives in Promotion Contests

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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.

Original languageEnglish
JournalEconomic Journal
Volume125
Issue number589
Pages (from-to)1952-1963
Number of pages12
ISSN0013-0133
DOIs
Publication statusPublished - 1 Dec 2015

ID: 216919021