Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/102244
Authors: 
Lang, Matthias
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4830
Abstract: 
Should principals explain and justify their evaluations? Suppose the principal's evaluation is private information, but she can provide justification by sending a costly cheap-talk message. If she does not provide justification, her message space is restricted, but the message is costless. I show that the principal justifies her evaluation to the agent if the evaluation indicates bad performance. The justification assures the agent that the principal has not distorted the evaluation downwards. In equilibrium, the wage increases in the agent's performance, when the principal justifies her evaluation. For good performance, however, the principal pays a constant high wage without justification.
Subjects: 
communication
justification
subjective evaluation
stochastic contracts
disclosure
JEL: 
D82
D86
J41
M52
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.