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Incentives in Tournaments with Endogenous Prize Selection

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Author Info
Christine Harbring
Bernd Irlenbusch

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Abstract

Tournament incentive schemes offer payments dependent on relative performance and are intended thereby to motivate agents to exert productive effort. Unfortunately, however, an agent may also be tempted to degrade the production of his competitors in order to improve the own relative position. We investigate whether this sabotage problem is mitigated in a repeated interaction between the agents and the principal. As sabotage can hardly be observed in real-world organizations, we employ a controlled experiment. Our data provide clear evidence that agents' behavior is not only guided by competition between agents but also by the possibility of punishing the principal via sabotage.

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Publisher Info
Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 161 (2005)
Issue (Month): 4 (December)
Pages: 636-
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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200512)161:4_636:iitwep_2.0.tx_2-x

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Keywords:

Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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  1. Harbring, Christine & Irlenbusch, Bernd, 2009. "Sabotage in Tournaments: Evidence from a Laboratory Experiment," IZA Discussion Papers 4205, Institute for the Study of Labor (IZA). [Downloadable!]
  2. Oliver Gürtler & Christine Harbring, . "Feedback in Tournaments under Commitment Problems: The-ory and Experimental Evidence," Discussion Papers 219, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  3. Bernd Irlenbusch & Gabriele K. Ruchala, 2006. "Relative Rewards within Team-Based Compensation," IZA Discussion Papers 2423, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Eriksen, Kristoffer W. & Kvaløy, Ola & Olsen, Trond E., 2008. "Tournaments with prize-setting agents," Discussion Papers 2008/23, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
    Other versions:
  5. Hessel Oosterbeek & Randolph Sloof & Joep Sonnemans, 2006. "Rent-seeking versus Productive Activities in a Multi-task Experiment," Tinbergen Institute Discussion Papers 06-083/1, Tinbergen Institute. [Downloadable!]
  6. Jeffrey Carpenter & Peter Hans Matthews & John Schirm, 2007. "Tournaments and Office Politics: Evidence from a Real Effort Experiment," IZA Discussion Papers 2972, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  7. Christine Harbring, 2006. "The effect of communication in incentive systems-an experimental study," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(5), pages 333-353. [Downloadable!]
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