Delegating Performance Evaluation

Speaker
Nick Netzer
Date
25/04/2017 - 12:30 - 11:00Add To Calendar 2017-04-25 11:00:00 2017-04-25 12:30:00 Delegating Performance Evaluation Abstract. We study optimal incentive contracts with multiple agents when performance evaluation is delegated to a reviewer. The reviewer may be biased in favor of the agents, but the degree of the bias is unknown to the principal. We show that a contest, which is a contract in which the principal determines 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 a modified all-pay auction, and it can also be implemented by a nested Tullock contest. Our analysis has implications for applications as diverse as the design of worker compensation, the awarding of research grants, and the allocation of foreign aid. Download Economics building (504), faculty lounge on the first floor. אוניברסיטת בר-אילן - Department of Economics Economics.Dept@mail.biu.ac.il Asia/Jerusalem public
Place
Economics building (504), faculty lounge on the first floor.
Affiliation
University of Zurich
Abstract

Abstract. We study optimal incentive contracts with multiple agents when performance evaluation is delegated to a reviewer. The reviewer may be biased in favor of the agents, but the degree of the bias is unknown to the principal. We show that a contest, which is a contract in which the principal determines 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 a modified all-pay auction, and it can also be implemented by a nested Tullock contest. Our analysis has implications for applications as diverse as the design of worker compensation, the awarding of research grants, and the allocation of foreign aid.

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Last Updated Date : 24/02/2017