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Information revelation in relational contracts

Fong, Yuk-Fai and Li, Jin (2016) Information revelation in relational contracts. Review of Economic Studies, 84 (1). pp. 277-299. ISSN 0034-6527

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Identification Number: 10.1093/restud/rdw035

Abstract

We explore subjective performance reviews in long-term employment relationships. We show that firms benefit from separating the task of evaluating the worker from the task of paying him. The separation allows the reviewer to better manage the review process, and can, therefore, reward the worker for his good performance with not only a good review contemporaneously, but also a promise of better review in the future. Such reviews spread the reward for the worker’s good performance across time and lower the firm’s maximal temptation to renege on the reward. The manner in which information is managed exhibits patterns consistent with a number of well-documented biases in performance reviews.

Item Type: Article
Official URL: https://academic.oup.com/restud
Additional Information: © 2016 Oxford University Press
Divisions: Management
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Sets: Departments > Management
Date Deposited: 10 Oct 2017 16:16
Last Modified: 20 Jan 2020 06:14
URI: http://eprints.lse.ac.uk/id/eprint/84560

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