Arbeitspapier
Communicating Subjective Evaluations
Consider managers evaluating their employees\' performances. Should managers justify their subjective evaluations? Suppose a manager\'s evaluation is private information. Justifying her evaluation is costly but limits the principal\'s scope for distorting her evaluation of the employee. I show that the manager justifies her evaluation if and only if the employee\'s performance was poor. The justification assures the employee that the manager has not distorted the evaluation downwards. For good performance, however, the manager pays a constant high wage without justification. The empirical literature demonstrates that subjective evaluations are lenient and discriminate poorly between good performance levels. This pattern was attributed to biased managers. I show that these effects occur in optimal contracts without any biased behavior.
- Language
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Englisch
- Bibliographic citation
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Series: Discussion Paper ; No. 120
- Classification
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Wirtschaft
Asymmetric and Private Information; Mechanism Design
Economics of Contract: Theory
Labor Contracts
Personnel Economics: Compensation and Compensation Methods and Their Effects
- Subject
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communication
justification
subjective evaluation
centrality
leniency
disclosure
- Event
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Geistige Schöpfung
- (who)
-
Lang, Matthias
- Event
-
Veröffentlichung
- (who)
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Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition
- (where)
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München und Berlin
- (when)
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2018
- Handle
- Last update
-
10.03.2025, 11:41 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Lang, Matthias
- Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition
Time of origin
- 2018
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