The interplay between the reviewer’s incentives and the journal’s quality standard

In this paper, we study the reviewer’s compensation problem in the presence of quality standard considerations. We examine a typical scenario in which a journal has to match the uncertain manuscript quality with a specified quality standard, but it imperfectly observes the reviewer’s efforts. This imperfect observability issue is an edge case where editors cannot tell the quality/effort of the review at all. We find that the journal always chooses an incentive scheme to reward the reviewer for achieving the highest quality outcome. However, this can lead to an inefficiency when the journal’s quality standard is below the highest possible quality outcome. This is so because reviewers usually seek to ensure that the manuscript’s quality acceptably matches the journal’s standard. Therefore, to improve the observability of review outcome achieved and to obtain a better signal of the reviewer’s effort, the journal can have the incentive to increase the quality standard. This, however, is only beneficial for non-extreme costs. In addition, we find that in order to motivate the reviewer to work hard in the situation where review outcomes of high quality are imperfectly observed due to a limited quality standard, the journal must give a larger reward to the reviewer. In sum, we show that a failure to observe the reviewer’s efforts motivates higher quality standards, and quality standard considerations lead to higher-powered reviewer’s compensations.