Title: Biased Contests and Moral Hazard: Implications for Career Profiles
Abstract: We study the design of a sequence of two contests between a pair of identical risk averse employees whose effort choices are private information. It is optimal for the organiz ation to bias the second contest in favor of the early winner-the reduction in second-period incentives is outweighed by the incre ase in first-period incentives. Thus, even though first-period suc cess reflects only transitory shocks and not ability, it is efficient to structure the contests so these shocks have persistent effects on employees' careers.
Publication Year: 1992
Publication Date: 1992-01-01
Language: en
Type: article
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Cited By Count: 5
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