Career concerns with exponential learning
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...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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The Econometric Society
2017
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| Online Access: | http://hdl.handle.net/1721.1/110011 https://orcid.org/0000-0002-9150-2334 |
| _version_ | 1811069309430005760 |
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| author | Hoerner, Johannes Bonatti, Alessandro |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Hoerner, Johannes Bonatti, Alessandro |
| author_sort | Hoerner, Johannes |
| collection | MIT |
| description | 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. |
| first_indexed | 2024-09-23T08:09:03Z |
| format | Article |
| id | mit-1721.1/110011 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T08:09:03Z |
| publishDate | 2017 |
| publisher | The Econometric Society |
| record_format | dspace |
| spelling | mit-1721.1/1100112022-09-23T11:15:45Z Career concerns with exponential learning Hoerner, Johannes Bonatti, Alessandro Sloan School of Management Bonatti, Alessandro 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. Sloan School of Management (Program on Innovation in Markets and Organizations) 2017-06-19T14:55:39Z 2017-06-19T14:55:39Z 2017-01 2015-09 Article http://purl.org/eprint/type/JournalArticle 1933-6837 http://hdl.handle.net/1721.1/110011 Bonatti, Alessandro, and Johannes Hörner. “Career Concerns with Exponential Learning: Career Concerns with Exponential Learning.” Theoretical Economics 12.1 (2017): 425–475. https://orcid.org/0000-0002-9150-2334 en_US http://dx.doi.org/10.3982/te2115 Theoretical Economics Creative Commons Attribution-NonCommercial 3.0 Unported https://creativecommons.org/licenses/by-nc/3.0/ application/pdf The Econometric Society Society for Economic Theory |
| spellingShingle | Hoerner, Johannes Bonatti, Alessandro Career concerns with exponential learning |
| title | Career concerns with exponential learning |
| title_full | Career concerns with exponential learning |
| title_fullStr | Career concerns with exponential learning |
| title_full_unstemmed | Career concerns with exponential learning |
| title_short | Career concerns with exponential learning |
| title_sort | career concerns with exponential learning |
| url | http://hdl.handle.net/1721.1/110011 https://orcid.org/0000-0002-9150-2334 |
| work_keys_str_mv | AT hoernerjohannes careerconcernswithexponentiallearning AT bonattialessandro careerconcernswithexponentiallearning |