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Too good to be true? Retention rules for noisy agents
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Espinosa, Francisco and Ray, Debraj (2023) Too good to be true? Retention rules for noisy agents. American Economic Journal: Microeconomics, 15 (2). pp. 493-535. doi:10.1257/mic.20200472 ISSN 1945-7669.
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WRAP-Too-good-to-be-true-retention-rules-noisy-agents-2022.pdf - Accepted Version - Requires a PDF viewer. Download (1560Kb) | Preview |
Official URL: https://doi.org/10.1257/mic.20200472
Abstract
An agent who privately knows his type seeks to be retained by a principal. Agents signal their type with some ambient noise, but can alter this noise, perhaps at some cost. Our main finding is that in equilibrium, the principal treats extreme signals in either direction with suspicion, and retains the agent if and only if the signal falls in some intermediate bounded set. In short, she follows the maxim: “if it seems too good to be true, it probably is.” We consider extensions and applications, including non-normal signal structures, dynamics with term limits, risky portfolio management, and political risk-taking.
Item Type: | Journal Article | ||||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce Q Science > QA Mathematics |
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Divisions: | Faculty of Social Sciences > Economics | ||||||
Library of Congress Subject Headings (LCSH): | Equilibrium , Business communication, Operations research, Employee retention | ||||||
Journal or Publication Title: | American Economic Journal: Microeconomics | ||||||
Publisher: | American Economic Association | ||||||
ISSN: | 1945-7669 | ||||||
Official Date: | May 2023 | ||||||
Dates: |
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Volume: | 15 | ||||||
Number: | 2 | ||||||
Page Range: | pp. 493-535 | ||||||
DOI: | 10.1257/mic.20200472 | ||||||
Status: | Peer Reviewed | ||||||
Publication Status: | Published | ||||||
Reuse Statement (publisher, data, author rights): | "Copyright © 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021 by the American Economic Association. Permission to make digital or hard copies of part or all of American Economic Association publications for personal or classroom use is granted without fee provided that copies are not distributed for profit or direct commercial advantage and that copies show this notice on the first page or initial screen of a display along with the full citation, including the name of the author. Copyrights for components of this work owned by others than AEA must be honored. Abstracting with credit is permitted. The author has the right to republish, post on servers, redistribute to lists and use any component of this work in other works. For others to do so requires prior specific permission and/or a fee. Permissions may be requested from the American Economic Association Administrative Office by going to the Contact Us form and choosing ""Copyright/Permissions Request"" from the menu. " | ||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||
Date of first compliant deposit: | 22 February 2022 | ||||||
Date of first compliant Open Access: | 24 February 2022 | ||||||
RIOXX Funder/Project Grant: |
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