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Classic promotion tournaments versus market-based tournaments

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  • Waldman, Michael

Abstract

As initially formulated in the seminal analysis of Lazear and Rosen (1981), an important perspective for understanding the role of promotions in firms is the tournament perspective. That is, a promotion and, in particular, the wage increase associated with a promotion is a prize that serves as an incentive for workers to exert effort and take other actions beneficial to the firm such as the accumulation of human capital. In this paper I consider whether the best way to model promotion tournaments is by having firms commit to prizes ex ante as in Lazear and Rosen's initial formulation, or whether promotion prizes should be modeled as arising from the signaling role of promotions and the competition between firms for promoted workers.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 31 (2013)
Issue (Month): 3 ()
Pages: 198-210

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Handle: RePEc:eee:indorg:v:31:y:2013:i:3:p:198-210

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Web page: http://www.elsevier.com/locate/inca/505551

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Keywords: Tournaments; Promotions; Signaling;

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Cited by:
  1. Gürtler, Marc & Gürtler, Oliver, 2013. "The optimality of heterogeneous tournaments," Working Papers IF42V1, Technische Universität Braunschweig, Institute of Finance.
  2. 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.
  3. Claussen, Jörg & Grohsjean, Thorsten & Luger, Johannes & Probst, Gilbert, 2014. "Talent management and career development: What it takes to get promoted," Journal of World Business, Elsevier, vol. 49(2), pages 236-244.

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