Performance Cycles

Lagziel, David; Lehrer, Ehud

Abstract

A decision maker repeatedly exerts efforts to produce new outputs, while being compensated based on his past and current production levels. We show that the decision maker’s optimal strategy dictates a cyclic oscillatory performance whenever the compensation depends on recent past performance. We apply our model to various economic settings such as the delegated portfolio-managers problem, an R&D investment problem, and a dynamic advertising problem.

Citation

Lagziel, D., & Lehrer, E. (2023). Performance Cycles. Economic Theory, 77, 999-1024. https://doi.org/10.1007/s00199-023-01516-x

• Journal Article Type: Article
• Acceptance Date: Jul 24, 2023
• Online Publication Date: Aug 25, 2023
• Publication Date: Aug 25, 2023
• Deposit Date: Aug 15, 2023
• Publicly Available Date: Aug 26, 2024
• Journal: Economic Theory
• Print ISSN: 0938-2259
• Electronic ISSN: 1432-0479
• Publisher: Springer
• Peer Reviewed: Peer Reviewed
• Volume: 77
• Pages: 999-1024
• DOI: https://doi.org/10.1007/s00199-023-01516-x
• Public URL: https://durham-repository.worktribe.com/output/1718295
• Publisher URL: https://www.springer.com/journal/199