Promotions and Incentives

نویسنده

Michael Gibbs

چکیده

This paper studies properties of promotion-based incentive schemes. Two general promotion rules, tournaments and standards, are compared. These differ in many ways, but are shown to have virtually identical empirical predictions about the structure of compensation in hierarchies. A relatively general characterization of multi-person tournaments is presented. Several empirically testable hypotheses are developed, especially on the relationship between the promotion probability and optimal rewards from promotion. Michael Gibbs Graduate School of Business University of Chicago Chicago, IL 60637 773-834-4351 [email protected] Copyright © Michael Gibbs I thank George Baker, Gary Becker, Chris Ferrall, Edward Lazear, Kenneth Merchant, Kevin J. Murphy, Sherwin Rosen, Karen Wruck, Martin Zelder, and seminar participants at Harvard for comments. Support from the Lynde and Harry Bradley Foundation, the Harvard Business School, and the Graduate School of Business at the University of Chicago is gratefully acknowledged. PROMOTIONS AND INCENTIVES Michael Gibbs University of Chicago

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