Performance cycles

David Lagziel*, Ehud Lehrer

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish
Pages (from-to)999-1024
Number of pages26
JournalEconomic Theory
Volume77
Issue number4
DOIs
StatePublished - Jun 2024
Externally publishedYes

Funding

FundersFunder number
Israel Science Foundation513/19
Israel Science Foundation

    Keywords

    • C61
    • C62
    • C79
    • Dynamic optimization
    • Performance cycles
    • Performance persistence

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