Delegating performance evaluation

Letina, Igor; Liu, Shuo; Netzer, Nick (2020). Delegating performance evaluation. Theoretical economics, 15(2), pp. 477-509. The Econometric Society 10.3982/TE3570

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We study optimal incentive contracts with multiple agents when performance is evaluated by a reviewer. The reviewer may be biased in favor of the agents, but the degree of bias is unknown to the principal. We show that a contest, which is a contract in which the principal fixes a set of prizes to be allocated to the agents, is optimal. By using a contest, the principal can commit to sustaining incentives despite the reviewer’s potential leniency bias. The optimal effort profile can be uniquely implemented by an all-pay auction with a cap. Our analysis has implications for various applications, such as the design of worker compensation or the allocation of research grants.

Item Type:

Journal Article (Original Article)

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics > Microeconomics

UniBE Contributor:

Letina, Igor

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

1933-6837

Publisher:

The Econometric Society

Language:

English

Submitter:

Dino Collalti

Date Deposited:

17 Jun 2020 08:40

Last Modified:

17 Jun 2020 08:49

Publisher DOI:

10.3982/TE3570

BORIS DOI:

10.7892/boris.138742

URI:

https://boris.unibe.ch/id/eprint/138742

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