Feedback on Ideas

Employees are often assigned tasks comprising two distinct phases: in the first phase, ideas are generated; in the second phase, the best idea is implemented. Furthermore, it is common for supervisors to give feedback to their employees during this process. This paper studies the supervisor’s problem. Supervisors face the following tradeoff: while honest feedback encourages employees to discard bad ideas, it can also be demotivating. We obtain three main results. First, the supervisor only gives honest feedback to agents who believe in their ability to succeed. Second, receiving honest feedback leads such high self-opinion agents to exert more effort. Third, overconfidence is potentially welfare improving.