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Multirater Performance Evaluations and Incentives

Axel Ockenfels¹; Dirk Sliwka²; Peter Werner³

¹ Max Planck Institute for Behavioral Economics · ² IZA - Institute of Labor Economics · ³ Maastricht University

We compare evaluations of employee performance by individuals and groups of supervisors, analyzing a formal model and running a laboratory experiment. The model predicts that multirater evaluations are more precise than single-rater evaluations if groups rationally aggregate their signals about employee performance. Our controlled laboratory experiment confirms this prediction and finds evidence that this can indeed be attributed to accurate information processing in the group. Moreover, when employee compensation depends on evaluations, multirater evaluations tend to be associated with higher performance.

DOI

10.1086/730321

Volume

43 (4)

Pages

985-1004

Language

en

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