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Biased Contests and Moral Hazard: Implications for Career Profiles

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  • Margaret A. MEYER

Abstract

We study the design of a sequence of two contests between a pair of identical risk averse employees whose effort choices are private information. It is optimal for the organization to "bias" the second contest in favor of the early winner--the reduction in second-period incentives is outweighed by the increase in first-period incentives. Thus, even though first-period success reflects only transitory shocks and not ability, it is efficient to structure the contests so these shocks have persistent effects on employees' careers.

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Bibliographic Info

Article provided by ENSAE in its journal Annals of Economics and Statistics.

Volume (Year): (1992)
Issue (Month): 25-26 ()
Pages: 165-187

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Handle: RePEc:adr:anecst:y:1992:i:25-26:p:08

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Cited by:
  1. Junichiro Ishida, 2006. "Dynamically Sabotage-Proof Tournaments," OSIPP Discussion Paper 06E001, Osaka School of International Public Policy, Osaka University.
  2. Volker Meier, 2001. "Setting Incentives: Temporary Performance Premiums Versus Promotion Tournaments," CESifo Working Paper Series 432, CESifo Group Munich.
  3. Sjögren Lindquist, Gabriella, 2006. "Tournaments and Unfair Treatment," Working Paper Series 8/2006, Swedish Institute for Social Research.
  4. Kiyotaki, Fumi, 2004. "The effects of a consolation match on the promotion tournament," Journal of the Japanese and International Economies, Elsevier, vol. 18(2), pages 264-281, June.
  5. Francesco Caselli & Thomas E. Cunningham & Massimo Morelli & Inés Moreno de Barreda, 2012. "Signalling, Incumbency Advantage, and Optimal Reelection Thresholds," NBER Working Papers 17833, National Bureau of Economic Research, Inc.
  6. Münster, Johannes, 2008. "Repeated contests with asymmetric information," Discussion Papers, Research Unit: Market Processes and Governance SP II 2008-08, Social Science Research Center Berlin (WZB).
  7. Jed DeVaro & Michael Waldman, 2012. "The Signaling Role of Promotions: Further Theory and Empirical Evidence," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 91 - 147.
  8. DeVaro, Jed, 2011. "Using "opposing responses" and relative performance to distinguish empirically among alternative models of promotions," MPRA Paper 35175, University Library of Munich, Germany.
  9. Ian Ayres & Colin Rowat & Nasser Zakariya, 2006. "Optimal two stage committee voting rules," Discussion Papers 04-23r, Department of Economics, University of Birmingham.
  10. Nicolas Carayol, 2003. "The incentive properties of the Matthew Effect in the academic competition," Working Papers of BETA 2003-11, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  11. Francesco Caselli & Tom Cunningham & Massimo Morelli & Inés Moreno de Barreda, 2012. "Signalling, Incumbency Advantage, and Optimal Reelection Rules," CEP Discussion Papers dp1122, Centre for Economic Performance, LSE.
  12. Miklós-Thal, Jeanine & Ullrich, Hannes, 2009. "Nomination contests: theory and empirical evidence from professional soccer," ZEW Discussion Papers 09-027, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. Waldman, Michael, 2007. "Theory and evidence in internal labor markets," MPRA Paper 5113, University Library of Munich, Germany.

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