Events at CERGE-EI

Prof. Johannes Hörner

Toulouse School of Economics, France

Authors: Johannes Hörner and Nicolas S. Lambert

Abstract: Performance evaluation (“rating”) systems not only provide information to users but also motivate the rated worker. This paper solves for the optimal (effort-maximizing) rating within the standard career concerns framework. We prove that this rating is a linear function of past observations. The rating, however, is not a Markov process, but rather the sum of two Markov processes. We show how it combines information of different types and vintages.  An increase in effort may adversely affect some (but not all) future ratings.

Keywords:  Career Concerns; Mechanism Design; Ratings.

JEL codes: C72, C73

Full Text:  “Motivational Ratings”