Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2026-06-05
Number: 26-028/VII
Author-Name: Robert Dur
Author-Workplace-Name: Erasmus University Rotterdam
Author-Name: Kimiyuki Morita
Author-Workplace-Name: Senshu University
Author-Name: Takeharu Sogo
Author-Workplace-Name: SKEMA Business School
Title: A Bright Side of Peter-Principle Promotions
Abstract: Promotion to managerial roles is often strongly based on workers' performance in their current roles rather than on their managerial aptitude—the Peter principle. This paper provides a novel rationale for this apparent mismatch when promotions serve no incentive role. We model workers who care about meeting managers' expectations, and managers with interpersonal projection bias: when forming expectations about workers' performance, they give excessive weight to their own past performance. We show that organizations benefit from promoting high-performing workers to managers even when they have low managerial aptitude, because such managers hold high expectations, inducing greater effort.
Classification-JEL: D21, D91, M51, M52, M54
Keywords: Peter principle, Guilt aversion, Interpersonal Projection Bias, Incentives
File-URL: https://papers.tinbergen.nl/26028.pdf
File-Format: application/pdf
File-Size: 598.223 bytes
Handle: RePEc:tin:wpaper:20260028