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The Promotion Rule under Imperfect Observability of the Employee’s Ability

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DOI: 10.4236/tel.2014.48084    2,594 Downloads   3,136 Views   Citations

ABSTRACT

This note provides the closed-form solution for the model by Lazear [1]. The employer adjusts the performance standard for promotion when the employer observes only the imperfect index of the employee’s ability. The adjustment margin is larger when the performance depends heavily on luck and depends lightly on the employee’s ability.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

Araki, S. and Kawaguchi, D. (2014) The Promotion Rule under Imperfect Observability of the Employee’s Ability. Theoretical Economics Letters, 4, 662-665. doi: 10.4236/tel.2014.48084.

References

[1] Lazear, E. (2004) The Peter Principle: A Theory of Decline. Journal of Political Economy, 112, S141-S163. http://dx.doi.org/10.1086/379943

  
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