Read full paper at: http://www.scirp.org/journal/PaperInformation.aspx?PaperID=50577#.VEX1Z1fHRK0 Author(s) Shota Araki 1 , Daiji Kawaguchi 1,2 Affiliation(s) 1 Graduate School of Economics, Hitotsubashi University, Tokyo, Japan . 2 IZA, Bonn, Germany . 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. KEYWORDS Peter Principle , Promotion , Employer’s Le...
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