Career Concerns with Exponential Learning

Bonatti, Alessandro and Hörner, Johannes (2017) Career Concerns with Exponential Learning. TSE Working Paper, n. 17-793, Toulouse

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Official URL: http://tse-fr.eu/pub/31604

Abstract

This paper analyzes the impact of market structure on career concerns. Effort increases the probability that a skilled agent achieves a one-time breakthrough. Wages are based on assessed ability and on expected output. For any wage, the agent works too little, too late. Under short-term contracts, effort and wages are single-peaked with seniority, due to the strategic substitutability of effort levels at different times. Both delay and underprovision of effort worsen if effort is observable. Commitment to wages by competing firms mitigates these inefficiencies. In that case, the optimal contract features piecewise constant wages and severance pay.

Item Type: Monograph (Working Paper)
Language: English
Date: March 2017
Place of Publication: Toulouse
Uncontrolled Keywords: career concerns, experimentation, career paths, up-or-out, reputation
JEL codes: D82 - Asymmetric and Private Information
D83 - Search; Learning; Information and Knowledge; Communication; Belief
M52 - Compensation and Compensation Methods and Their Effects (stock options, fringe benefits, incentives, family support programs, seniority issues)
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 30 Mar 2017 11:38
Last Modified: 07 Mar 2018 13:24
OAI ID: oai:tse-fr.eu:31604
URI: http://publications.ut-capitole.fr/id/eprint/23338

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