Document de travail
Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration
Elisabetta Iossa et Patrick Rey
IDEI Working Paper
n° 757, novembre 2012
Référence
Elisabetta Iossa et Patrick Rey, « Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration », IDEI Working Paper, n° 757, novembre 2012.
Résumé
We study how career concerns affect the dynamics of incentives in a multi-period contract, when the agent’s productivity can evolve exogenously (random shocks) or improve endogenously through investment. We show that incentives are stronger and performance is higher when the contract approaches its expiry date. Contrary to common wisdom, long-term contracts may strengthen reputational effects whereas short-term contracting may be optimal when investment has persistent, long-term effects.
Mots-clés
Career concerns; contract duration; contract renewal; reputation and dynamic incentives;