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Self‐Selection And The Efficiency Of Tournaments

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  • TOR ERIKSSON
  • SABRINA TEYSSIER
  • MARIE‐CLAIRE VILLEVAL

Abstract

The literature has shown that the overall efficiency of exogenously imposed tournaments is reduced by a high variance in performance. This article reports results from an experiment analyzing whether allowing subjects to self‐select into different payment schemes is reducing the variability of performance in tournaments. We show that when the subjects choose to enter a tournament instead of a piece‐rate payment scheme, the average effort is higher and the between‐subject variance is substantially lower than when the same payment scheme is imposed. Mainly based on risk aversion, sorting is efficiency enhancing since it increases the homogeneity of the contestants. (JEL M52, J33, J31, C81, C91)

Suggested Citation

  • Tor Eriksson & Sabrina Teyssier & Marie‐Claire Villeval, 2009. "Self‐Selection And The Efficiency Of Tournaments," Economic Inquiry, Western Economic Association International, vol. 47(3), pages 530-548, July.
    • Handle: RePEc:bla:ecinqu:v:47:y:2009:i:3:p:530-548
    DOI: 10.1111/j.1465-7295.2007.00094.x
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    More about this item

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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