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On the Virtues of Hiring Lemons
Author(s) -
Gürtler Oliver,
Kräkel Matthias
Publication year - 2012
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.2558
Subject(s) - incentive , competition (biology) , tournament , key (lock) , selection (genetic algorithm) , business , microeconomics , economics , labour economics , industrial organization , marketing , computer science , ecology , mathematics , computer security , combinatorics , biology , artificial intelligence
Recruiting high‐ability workers and implementing optimal efforts are among the key objectives of a firm's personnel policy. We show that, if the firm applies a tournament scheme—that is, a competitive career system—selection and incentive issues are strictly interrelated, thus leading to a fundamental conflict: if the firm is primarily interested in balanced worker competition, there will be a rationale for hiring low‐ability workers (‘lemons’). Copyright © 2012 John Wiley & Sons, Ltd.