Career concerns incentives: An experimental test

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Abstract

Holmström's [Holmström, B., 1982/1999. Managerial incentive problems: a dynamic perspective. Review of Economic Studies 66, 169-182. Originally published in: Essays in Economics and Management in Honour of Lars Wahlbeck, Helsinki] career concerns model has become a workhorse for analyzing agency issues in many fields. The underlying signal jamming argument requires players to use information in a Bayesian way, which is difficult to directly test with field data: typically little is known about the information that individuals base their decisions on. Our laboratory experiment provides prima facie evidence: (i) the signal jamming mechanism successfully creates incentives on the labor supply side; (ii) decision errors take time to decrease; (iii) while subjects' average beliefs are remarkably consistent with play, a mild winner's curse arises on the labor demand side. © 2009 Elsevier B.V. All rights reserved.

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Koch, A. K., Morgenstern, A., & Raab, P. (2009). Career concerns incentives: An experimental test. Journal of Economic Behavior and Organization, 72(1), 571–588. https://doi.org/10.1016/j.jebo.2009.04.014

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