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Garicano, Luis and Santos, Tano (2004) Referrals. American Economic Review, 94 (3). pp. 499-525. ISSN 0002-8282

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Identification Number: 10.1257/0002828041464506


This paper studies the matching of opportunities with talent when costly diagnosis confers an informational advantage to the agent undertaking it. When this agent is underqualified, adverse selection prevents efficient referrals through fixed-price contracts. Spot-market contracts that rely on income sharing can match opportunities with talent but induce a team-production problem which, if severe enough, can prevent the referral of valuable opportunities. Partnership contracts, in which agents agree in advance to the allocation of opportunities and of the revenues they generate, support referrals where the market cannot, but often at the expense of distortions on those opportunities that are not referred.

Item Type: Article
Official URL:
Additional Information: © 2009 American Economic Association
Divisions: Management
Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor
Date Deposited: 03 Nov 2009 16:24
Last Modified: 20 Nov 2023 19:42

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