Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration

Iossa, Elisabetta and Rey, Patrick (2014) Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration. Journal of the European Economic Association, vol. 12 (n° 3). pp. 549-574.

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Official URL: http://tse-fr.eu/pub/27405

Abstract

We study how career concerns affect the dynamics of incentives in a multi-period contract, when the agent's productivity is a stochastic function of his past productivity and investment. We show that incentives are stronger and performance is higher when the contract approaches its expiry date. Contrary to common wisdom, long-term contracts may strengthen reputational effects whereas short-term contracting may be optimal when investment has persistent, long-term effects.

Item Type: Article
Language: English
Date: June 2014
Refereed: Yes
Uncontrolled Keywords: Career concerns, contract duration, contract renewal, reputation and dynamic incentives
JEL codes: D21 - Firm Behavior
D23 - Organizational Behavior; Transaction Costs; Property Rights
D86 - Economics of Contract - Theory
L24 - Contracting Out; Joint Ventures; Technology Licensing
L51 - Economics of Regulation
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 16 Mar 2015 14:38
Last Modified: 07 Mar 2018 13:23
OAI ID: oai:tse-fr.eu:27405
URI: http://publications.ut-capitole.fr/id/eprint/16475

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