NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Qiang Fu

Department of Strategy and Policy
NUS Business School
15 Kent Ridge Drive
Singapore

E-Mail: bizfq@nus.edu.sg
Institutional Affiliation: National Univ of Singapore

NBER Working Papers and Publications

May 2020Confidence Management in Tournaments
with Shanglyu Deng, Hanming Fang, Zenan Wu: w27186
An incumbent employee competes against a new hire for bonus or promotion. The incumbent’s ability is commonly known, while that of the new hire is private information. The incumbent is subject to a perceptional bias: His prior about the new hire’s type differs from the true underlying distribution. He can be either ex ante overconfident or underconfident. We first explore whether a firm that aims to maximize aggregate effort would benefit or suffer from the bias. It is shown that debiasing may not be productive in incentivizing efforts. We then study the optimal information disclosure policy. The firm is allowed to ex ante commit to whether an informative signal—which allows the incumbent to infer the new hire’s type—will be disclosed publicly. We fully characterize the conditions under wh...
 
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