Confidence Management in Tournaments

• DOI: 10.2139/ssrn.3598193
• Publication Date: 2020-05-15T17:41:56Z
• Authors: Shanglyu Deng; Hanming Fang; Qiang Fu; Zenan Wu

An incumbent employee competes against a new hire for bonus or promotion. The incumbent’s ability is commonly known, while that of the private information. subject to perceptional bias: His prior about hire’s type differs from true underlying distribution. He can be either ex ante overconfident underconfident. We first explore whether firm aims maximize aggregate effort would benefit suffer bias. It shown debiasing may not productive in incentivizing efforts. then study optimal information disclosure policy. allowed commit an informative signal—which allows infer type—will disclosed publicly. fully characterize conditions under which transparency opacity will prevail. further take Bayesian persuasion approach optimally design firm’s evaluation and feedback structure. also consider alternative context manager concerned expected winner’s effort. demonstrate insights obtained baseline setting remain intact. Our results shed light on extensive discussion confidence management firms debate organizational transparency.