We study how career concerns affect the dynamics of incentives in a multi-period contract, when the agent's productivity is a stochastic function of his past productivity and investment. We show that incentives are stronger and performance is higher when the contract approaches its expiry date. Contrary to common wisdom, long-term contracts may strengthen reputational effects whereas short-term contracting may be optimal when investment has persistent, long-term effects.

Iossa, E., Rey, P. (2014). Building reputation for contract renewal: implications for performance dynamic and contract duration. JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION, 12(3), 549-574 [10.1111/jeea.12075].

Building reputation for contract renewal: implications for performance dynamic and contract duration

IOSSA, ELISABETTA;
2014-01-01

Abstract

We study how career concerns affect the dynamics of incentives in a multi-period contract, when the agent's productivity is a stochastic function of his past productivity and investment. We show that incentives are stronger and performance is higher when the contract approaches its expiry date. Contrary to common wisdom, long-term contracts may strengthen reputational effects whereas short-term contracting may be optimal when investment has persistent, long-term effects.
2014
Pubblicato
Rilevanza internazionale
Articolo
Esperti anonimi
Settore SECS-P/01 - ECONOMIA POLITICA
English
Con Impact Factor ISI
procurement; reputation; nonverifiable quality
Iossa, E., Rey, P. (2014). Building reputation for contract renewal: implications for performance dynamic and contract duration. JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION, 12(3), 549-574 [10.1111/jeea.12075].
Iossa, E; Rey, P
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/90907
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