We analyze a situation where common noise makes compensation based on relative performance evaluation (RPE) desirable, but where the agents' ability to hold-up values ex post obstruct the implementation of optimal RPE schemes. The principal can take actions to constrain the agents' hold-up power...

Firms use subjective performance evaluations to provide employees with both incentives and feedback. This article shows that if an objective measure of performance, however imperfect, is available, subjective evaluations with incentive effects can be sustained even without repeated interaction....

This paper analyzes a mathematical model to examine a situation where an agent can show off his efforts to the principal for a higher evaluation under a one-period employment contract based on subjective performance evaluation. The analysis results indicated that the agent could achieve an...

We compare evaluations of employee performance by individuals and groups of supervisors, analyzing a formal model and running a laboratory experiment. The model predicts that multi-rater evaluations are more precise than single-rater evaluations if groups rationally aggregate their signals about...

Organisations design performance evaluation systems to obtain desired work outcomes. This study analyses how subjective performance evaluation (SPE), a specific type of performance evaluation, is related to managerial work outcomes—turnover intention, organisational identification, and...

Many firms use subjective performance appraisal systems due to lack of objective performance measures. In these cases, supervisors usually have to rate the performance of their subordinates. Using such systems, it is a well established fact that many supervisors tend to assess the employees too...