Template-Type: ReDIF-Paper 1.0
Title: Inducing Effort Through Grades
Author-Name: David Rodina
Author-Email: drodina1988@gmail.com
Author-Name: John Farragut
Author-Email: johndfarragut@gmail.com

Classification-JEL: D8
Keywords: Information Design

Abstract: We study the problem of a principal who wants to incentivize an agent's investment
in productivity through an information disclosure policy. The agent participates in a
market and benefits from an improved perception of his productivity. Under asymmetric information about the agent's ability we explore how qualitative features of the optimal deterministic grading scheme depend on the distribution of the agent's ability.
Perhaps surprisingly, random grades can induce higher investment. When the effect
of the agent's investment is subject to exogenous shocks and there is no asymmetric
information, in a wide variety of circumstances the optimal disclosure policy has a
relatively simple threshold form.

Note: 
Length: 34
Creation-Date: 2020-10
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp221
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2020_221