Optimal effort incentives in dynamic tournaments

Optimal Effort Incentives in Dynamic Tournaments

Potential, Prizes and Performance: Testing Tournament Theory with Professional Tennis Data

Potential, Prizes and Performance: Testing Tournament Theory with Professional Tennis Data This paper tests two hypotheses from the theory of elimination tournaments: (i) that uneven tournaments, where the contestants are ex ante heterogeneous, entail lower effort exertion; this is a prediction from agency theory that has not been tested empirically before; and (ii) whether incentives set throu...

Promotions and Incentives: The Case of Multi-Stage Elimination Tournaments

Promotions and Incentives: The Case of Multi-Stage Elimination Tournaments Promotion tournaments play an important role for the provision of incentives in firms. In this paper, we extend research on single-stage rank-order tournaments and analyze behavior in multi-stage elimination tournaments. The main treatment of our laboratory experiment is a two-stage tournament in which equilibrium effort...

Promotion Tournaments and Individual Performance Pay ∗

We analyze the optimal combination of promotion tournaments and individual performance pay in an employment relationship. An agent’s effort is non-observable and he has private information about his suitability for promotion. Thus, promotion tournaments and individual performance pay need to be combined to serve both incentive and selection purposes. We find that, if it is sufficiently importan...

Dynamically Sabotage-Proof Tournaments

This paper explores the consequences of sabotage for the design of incentive contracts. The possibility of sabotage gives rise to a dynamic concern, similar to the Ratchet effect, which distorts the agents’ incentives. We first show that the mere possibility of sabotage may make it impossible to implement the first-best effort, and then offer two distinct incentive schemes, fast track and late ...