Subjective performance and the value of blind evaluation

The incentive and project selection effects of agent anonymity are investigated in a setting where an evaluator observes a subjective signal of project quality. Although the evaluator cannot commit ex ante to an acceptance criterion, she decides up front between informed review, where the agent's ability is directly observable, or blind review, where it is not. An ideal acceptance criterion balances the goals of incentive provision and project selection. Relative to this, informed review results in an excessively steep equilibrium acceptance policy: the standard applied to low-ability agents is too stringent and the standard applied to high-ability agents is too lenient. Blind review, in which all types face the same standard, often provides better incentives, but it ignores valuable information for selecting projects. The evaluator prefers a policy of blind (respectively informed) review when the ability distribution puts more weight on high (respectively low) types, the agent's pay-off from acceptance is high (respectively low), or the quality signal is precise (respectively imprecise). Applications discussed include the admissibility of character evidence in criminal trials and academic refereeing. © The Author 2011. Published by Oxford University Press on behalf of The Review of Economic Studies Limited.

Duke Scholars

Author Curtis R. Taylor Economics

Author Huseyin Yildirim Economics