RICERCHE
Building Reputation for Contract Renewal: Implications for Performance Dynamic and Contract duration,’ with Patrick Rey. CEPR Discussion Paper 9571, 2013; Journal of the European Economic Association. Forthcoming.
Elisabetta Iossa
Abstract: We study how career concerns affect the dynamics of incentives in a multi-period contract, when the agent’s productivity is a stochastic function of his past productivity and 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.
