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  4. February 2015
  5. Subjective Evaluations: Discretionary Bonuses and Feedback Credibility

American Economic Journal:
Microeconomics

ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)

Subjective Evaluations: Discretionary Bonuses and Feedback Credibility

  • William Fuchs
American Economic Journal: Microeconomics
vol. 7, no. 1, February 2015
(pp. 99–108)
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Abstract

We provide a new rationale for the use of discretionary bonuses. In a setting with unknown match qualities between a worker and a firm and subjective evaluations by the principal, bonuses are useful in order to make the feedback from the firm to the workers credible. This way workers in good matches are less inclined to accept outside offers. (JEL D82, J33, M12, M52)

Citation

Fuchs, William. 2015. "Subjective Evaluations: Discretionary Bonuses and Feedback Credibility." American Economic Journal: Microeconomics, 7 (1): 99–108. DOI: 10.1257/mic.20130250

Additional Materials

JEL Classification

  • D82 Asymmetric and Private Information; Mechanism Design
  • J33 Compensation Packages; Payment Methods
  • M12 Personnel Management; Executives; Executive Compensation
  • M52 Personnel Economics: Compensation and Compensation Methods and Their Effects
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