Economics Insights @ CBS

We study the role of commitment in communication and its interactions with rules, which determine whether information is verifiable. Our framework nests models of cheap talk, information disclosure, and Bayesian persuasion. It predicts that commitment has opposite effects on information transmission under the two alternative rules. We leverage these contrasting forces to experimentally establish that subjects react to commitment in line with the main qualitative implications of the theory. Quantitatively, not all subjects behave as predicted.

We provide evidence that in certain contexts, firms set upward-striving goals and that this upward striving yields significant performance and visibility benefits. We develop a model of variable attention in which, as firms’ performance levels approach cognitively salient round numbers, managers strategically shift their focus from easier-to-reach goals based on historical and social reference points to more challenging goals that provide external visibility and capital market benefits.

Evaluations play a critical role in the allocation of resources and opportunities.
Although evaluation systems are a cornerstone of organizational and market
processes, they often reinforce social and economic inequalities. The body of
organizational research on inequality and evaluations is extensive, but it is also
fragmented, siloed within specific contexts and types of evaluations (e.g., hiring,
performance). As a result, we currently lack a systemic understanding of the
conditions under which inequalities emerge. This paper provides a unifying