Career concerns incentives: An experimental test

Koch, Alexander K.; Morgenstern, Albrecht; Raab, Philippe

doi:10.1016/j.jebo.2009.04.014

Cited by 22 publications

(12 citation statements)

References 27 publications

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“…In both settings, the principal's earnings were based on the agent's ability and not on his performance. Koch et al (2009) reported that, consistent with the theoretical prediction, an agent's effort is greater when his abilities are hidden. Moreover, and also consistent with theoretical predictions, the wages that the agent receives from the principal are correlated with the effort level when the ability is unknown, but not when the ability is known.…”

Section: Related Literaturesupporting

confidence: 63%

“…Testing the classic career concerns model, Koch et al (2009) reported on a laboratory experiment that compared a setting in which the principal observes the sum of the effort and ability to a setting in which the principal observes the two variables separately. In both settings, the principal's earnings were based on the agent's ability and not on his performance.…”

Section: Related Literaturementioning

confidence: 99%

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Why Genius Leads to Adversity: Experimental Evidence on the Reputational Effects of Task Difficulty Choices

Katok

Siemsen

2011

Management Science

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We use a behavioral laboratory experiment to study how agents with reputation concerns select the difficulty of their tasks. Drawing upon existing theory, we subjected participants in our study to a context in which they had to convince a principal of their capability to reap financial benefits. Our results show that participants tended to increase the difficulty of their task to enhance their reputation. In addition, we provide evidence that performance rewards reduce a less capable agent's tendency to choose a more difficult task, whereas a highly capable agent's pattern of choices is unaffected by performance rewards. Although the productivity of agents in our experiment therefore decreased if they had to convince a principal of their capability, we show that these detrimental performance implications can to some degree be overcome for less capable agents through performance rewards or by ensuring that the principal can interpret the agent's choice. This paper was accepted by Christoph Loch, R&D and product development.incentives in R&D, behavioral operations, career concerns, decentralization

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Section: Related Literaturesupporting

confidence: 63%

Section: Related Literaturementioning

confidence: 99%

Why Genius Leads to Adversity: Experimental Evidence on the Reputational Effects of Task Difficulty Choices

Katok

Siemsen

2011

Management Science

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“…Career-concerns models have been applied mostly to the compensation of CEOs and other senior executives, beginning with Fama (1980). We are aware of two experimental papers on career concerns; the more recent (Koch, Morgenstern and Raab 2009) is actually the simpler one. Consider a world with a finite number of agents and principals.…”

Section: B) Career Concernsmentioning

confidence: 99%

Lab Labor: What Can Labor Economists Learn from the Lab?

2010

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Manuscript prepared for Handbook of Labor Economics, volume 4, Orley Ashenfelter and David Card, editors. We thank Michael Kuhn and Loni Spilberg for excellent research assistance. We have done our utmost to identify as many lab experimental papers in labor economics as possible, and to represent the results of these papers accurately. Given the volume of recent research in this area and the deadline we have faced in writing this review, it is inevitable that we have missed some important work. We also sincerely hope that we have not mischaracterized any paper's conclusions. The authors apologize for these limitations in advance and nevertheless hope that our review provides a helpful guide to the 'lab labor' literature to date The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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“…For their experiments, Irlenbusch and Sliwka (2006) as well as Koch, Morgenstern and Raab (2009) used a simplified two-period version of the well-known career-concerns model by Holmström (1982Holmström ( , 1999. The two experimental papers yield mixed results on the validity of career concerns for real decision makers.…”

Section: Introductionmentioning

confidence: 99%

Bonus Payments, Hierarchy Levels, and Tenure: Theoretical Considerations and Empirical Evidence

Grund

Kräkel

2012

Schmalenbach Bus Rev

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. Using data on executive compensation for the German chemical industry, we investigate the relevance of two theoretical approaches that focus on bonuses as part of a long term wage policy of a firm. The first approach argues that explicit bonuses serve as substitutes for implicit career concerns. The second approach claims that bonuses are used as complements to an executive's internal career. Our data show that bonus payments are mostly prevalent among senior executives at higher hierarchy levels and rather for management jobs than for jobs in research and development. This is true for the whole chemical sector as well as for single large corporations. The findings indicate that the two theoretical views are not mutually exclusive, but are both relevant in practice. JEL Classification:M52, J33

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Career concerns incentives: An experimental test

Cited by 22 publications

References 27 publications

Why Genius Leads to Adversity: Experimental Evidence on the Reputational Effects of Task Difficulty Choices

Why Genius Leads to Adversity: Experimental Evidence on the Reputational Effects of Task Difficulty Choices

Lab Labor: What Can Labor Economists Learn from the Lab?

Bonus Payments, Hierarchy Levels, and Tenure: Theoretical Considerations and Empirical Evidence

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