Delegating performance evaluation

Arbeitspapier

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 an all-pay auction with a cap, 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 266

Classification and Topics

• Classification: Wirtschaft ; Institutions: Design, Formation, Operations, and Impact ; Asymmetric and Private Information; Mechanism Design ; Personnel Economics: Compensation and Compensation Methods and Their Effects
• Subject: Performance evaluation ; delegation ; optimality of contests

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Letina, Igor ; Liu, Shuo ; Netzer, Nick
• Event: Veröffentlichung
• (who): University of Zurich, Department of Economics
• (where): Zurich
• (when): 2017

Further information

• DOI: doi:10.5167/uzh-141281
• Handle: http://hdl.handle.net/10419/173424
• Last update: 10.03.2025, 11:44 AM CET