Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/127086
Authors: 
Chen, Chia-Hui
Ishida, Junichiro
Year of Publication: 
2015
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 919
Abstract: 
We consider a "tenure-clock problem" in which a principal may set a deadline by which she needs to evaluate an agent's ability and decides whether to promote him or not. We embed this problem in a continuous-time model with both hidden action and hidden information, where the principal must induce the agent to exert effort to facilitate her learning process. The value of committing to a deadline is examined in this environment, and factors that make the deadline more profitable are identified. Our simple framework allows us to obtain a complete characterization of the equilibrium, both with and without commitment, and provides insight into why up-or-out contracts are prevalent in some industries while they are almost non-existent in others.
Subjects: 
dynamic agency
deadlines
experimentation
standard promotion practices
up-or-out contracts
JEL: 
D82
D83
Document Type: 
Working Paper

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