Arbeitspapier
Communicating Subjective Evaluations
Should principals explain and justify their evaluations? Suppose the principal's evaluation is private information, but she can provide justification by sending a costly cheap-talk message. If she does not provide justification, her message space is restricted, but the message is costless. I show that the principal justifies her evaluation to the agent if the evaluation indicates bad performance. The justification assures the agent that the principal has not distorted the evaluation downwards. In equilibrium, the wage increases in the agent's performance, when the principal justifies her evaluation. For good performance, however, the principal pays a constant high wage without justification.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 4830
- 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
stochastic contracts
disclosure
- Event
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Geistige Schöpfung
- (who)
-
Lang, Matthias
- Event
-
Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
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2014
- Handle
- Last update
-
10.03.2025, 11:42 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
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2014
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