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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Volume (Year): 161 (2005) Issue (Month): 4 (December) Pages: 636- Download reference. The following formats are available: HTML
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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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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.
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