Do Output-Dependent Prizes Alleviate the Sabotage Problem in Tournaments?

We investigate whether tournament prizes that depend on joint output (“variable prize tournaments”) can alleviate the sabotage problem which is otherwise inherent in structures. In a game-theoretical model with three contestants, we compare fixed-prize tournaments where contestants’ output. Our analysis suggests incentives to may be counteracted variable-prize such contestants no longer sabotage, but help one another. empirically test implications of our classroom experiment participants’ choices treatment (FP) those (VP) between-subjects design. Given parametrization, expect efforts identical both treatments, and FP VP treatment. accordance model, find participants another, whereas At same time, effort levels do not vary between two treatments.