Career concerns with exponential learning
Name
Bonatti-2017-Career concerns with exponential.pdf
Size
643.35 KB
Format
Adobe PDF
Checksum (MD5)
529bbac8125e6bed83c34ba3ff527ad4
Author(s)
Hoerner, Johannes
Bonatti, Alessandro
Date Issued
January 2017
Journal
Theoretical Economics
Publisher
The Econometric Society
Citation
Bonatti, Alessandro, and Johannes Hörner. “Career Concerns with Exponential Learning: Career Concerns with Exponential Learning.” Theoretical Economics 12.1 (2017): 425–475.
Version
Final published version
Abstract
This paper examines the interplay between career concerns and market structure. Ability and effort are complements: effort increases the probability that a skilled agent achieves a one-time breakthrough. Wages are based on assessed ability and on expected output. Effort levels at different times are strategic substitutes and, as a result, the unique equilibrium effort and wage paths are single-peaked with seniority. Moreover, for any wage profile, the agent works too little, too late. Commitment to wages by competing firms mitigates these inefficiencies. In that case, the optimal contract features piecewise constant wages and severance pay.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-NonCommercial 3.0 Unported
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.3982/te2115
