A theory of `yes men'

Abstract

This paper illustrates an incentive for workers to conform to the opinion of their supervisors when firms use subjective performance evaluation. This desire to conform arises endogenously from the firm's need to induce the worker to exert effort. The author shows that firms may optimally eschew the use of incentive contracts to retain workers' incentives for honesty. The author illustrates that the incentive to conform implies inefficiencies, even when workers are risk-neutral, and is likely to lead to more centralized decision-making than in the absence of the desire to conform. Copyright 1993 by American Economic Association.

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