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Incentive effects and overcrowding in tournaments: An experimental analysis

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Author Info

  • Donald Vandegrift

    ()

  • Abdullah Yavas

    ()

  • Paul Brown

    ()

Abstract

This study reports experiments that examine outcomes when agents choose between a payment scheme that rewards based on absolute performance (i.e., piece rate) and a scheme that rewards based on relative performance (i.e., a tournament). Holding total payments in the tournament constant, performance is higher when the tournament option is winner-take-all compared to a graduated tournament (i.e., second and third-place performers also receive a payment). Performance is higher in the winner-take all tournaments even among participants that choose the piece-rate option. While there is a modest amount of overcrowding, there are no significant differences in overcrowding across conditions. Entry rates into the tournament and the relative ability of tournament entrants (compared to non-entrants in the same condition) are higher in the graduated tournament condition than the winner-take-all conditions. Consequently, the winner-take-all tournament is more efficient than the graduated tournament (incentive effects are stronger and the overcrowding is about the same), but the graduated tournament provides a more effective mechanism to identify the most capable performer in a talent pool. Copyright Economic Science Association 2007

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File URL: http://hdl.handle.net/10.1007/s10683-006-9138-9
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Bibliographic Info

Article provided by Springer in its journal Experimental Economics.

Volume (Year): 10 (2007)
Issue (Month): 4 (December)
Pages: 345-368

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Handle: RePEc:kap:expeco:v:10:y:2007:i:4:p:345-368

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Web page: http://www.springerlink.com/link.asp?id=102888

Related research

Keywords: Tournament; Overcrowding; Experiment; Incentive effects;

References

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Cited by:
  1. Charness, Gary & Kuhn, Peter J., 2010. "Lab Labor: What Can Labor Economists Learn from the Lab?," IZA Discussion Papers 4941, Institute for the Study of Labor (IZA).
  2. Kosmas Marinakis & Theofanis Tsoulouhas, 2006. "Are Tournaments Optimal over Piece Rates under Limited Liability for the Principal?," Working Paper Series 009, North Carolina State University, Department of Economics, revised Sep 2006.
  3. Oliver Baumann & Nils Stieglitz, 2011. "Motivating Organizational Search," DRUID Working Papers 11-08, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  4. J. Atsu Amegashie, 2013. "Sabotage in Contests: An Overview," CESifo Working Paper Series 4422, CESifo Group Munich.

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