Performance Measurement and Information Production
20 Pages Posted: 3 Dec 2004
There are 2 versions of this paper
Performance Measurement and Information Production
Performance Measurement and Information Production
Date Written: December 2005
Abstract
When performance measures are used for evaluation purposes, agents have some incentives to learn how their actions affect these measures. We show that the use of imperfect performance measures can cause an agent to devote too many resources (too much effort) to acquiring information. Doing so can be costly to the principal because the agent can use information to game the performance measure to the detriment of the principal. We analyze the impact of endogenous information acquisition on the optimal incentive strength and the quality of the performance measure used.
Keywords: Performance measurement, information acquisition
JEL Classification: D82, J33, M40, M46
Suggested Citation: Suggested Citation
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