Screening of possibly incompetent agents

Nina Baranchuk; Philip H. Dybvig

doi:10.1016/j.econlet.2015.07.016

Screening of possibly incompetent agents

Nina Baranchuk
, Philip H. Dybvig

Research output: Contribution to journal › Article › peer-review

Abstract

Accepting a contract with a high performance sensitivity is normally interpreted as a signal of high ability. However, a high self-assessment may be an incompetent forecast by an incompetent worker. In a model where optimistic agents have low ability, a low performance sensitivity screens out the incompetent agents. However, when agents are wealthy enough, the principal prefers to select the incompetent agent who covers the downside (as in a vanity press).

Original language	English
Pages (from-to)	15-18
Number of pages	4
Journal	Economics Letters
Volume	135
DOIs	https://doi.org/10.1016/j.econlet.2015.07.016
State	Published - Oct 1 2015

Keywords

Agency
Disagreement
Prior beliefs
Screening

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10.1016/j.econlet.2015.07.016

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title = "Screening of possibly incompetent agents",

abstract = "Accepting a contract with a high performance sensitivity is normally interpreted as a signal of high ability. However, a high self-assessment may be an incompetent forecast by an incompetent worker. In a model where optimistic agents have low ability, a low performance sensitivity screens out the incompetent agents. However, when agents are wealthy enough, the principal prefers to select the incompetent agent who covers the downside (as in a vanity press).",

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AU - Dybvig, Philip H.

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N2 - Accepting a contract with a high performance sensitivity is normally interpreted as a signal of high ability. However, a high self-assessment may be an incompetent forecast by an incompetent worker. In a model where optimistic agents have low ability, a low performance sensitivity screens out the incompetent agents. However, when agents are wealthy enough, the principal prefers to select the incompetent agent who covers the downside (as in a vanity press).

AB - Accepting a contract with a high performance sensitivity is normally interpreted as a signal of high ability. However, a high self-assessment may be an incompetent forecast by an incompetent worker. In a model where optimistic agents have low ability, a low performance sensitivity screens out the incompetent agents. However, when agents are wealthy enough, the principal prefers to select the incompetent agent who covers the downside (as in a vanity press).

KW - Agency

KW - Disagreement

KW - Prior beliefs

KW - Screening

UR - https://www.scopus.com/pages/publications/84938766688

U2 - 10.1016/j.econlet.2015.07.016

DO - 10.1016/j.econlet.2015.07.016

M3 - Article

AN - SCOPUS:84938766688

SN - 0165-1765

VL - 135

SP - 15

EP - 18

JO - Economics Letters

JF - Economics Letters

ER -

Screening of possibly incompetent agents

Abstract

Keywords

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