Citation

Discussion Paper Details

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Title: Biased Contests and Moral Hazard: Implications for Career Profiles

Author(s): Margaret A Meyer

Publication Date: February 1992

Keyword(s): Bias, Career Profiles, Contests, Moral Hazard and Organizations

Programme Area(s): Applied Macroeconomics

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 organization to `bias' the second contest in favor of the early winner - the reduction in second-period incentives is outweighed by the increase in first-period incentives. Thus, even though first-period success reflects only transitory shocks and not ability, it is efficient to structure the contests so these shocks have persistent effects on employees' careers.

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Bibliographic Reference

Meyer, M. 1992. 'Biased Contests and Moral Hazard: Implications for Career Profiles'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=637