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Precision in U-Type and J-Type Tournaments

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Author Info
Anja Schöttner

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Abstract

In this paper I contrast the impact of precision, i.e., the level of accuracy with which workers’ performance is assessed, on wage costs in U- and J-type tournaments. In U-type tournaments prizes are fixed. In J-type tournaments only an overall wage sum is specified. The principal can increase precision by including more signals in performance measurement. Doing so leads to stronger incentives in U-type tournaments, but not in J-type tournaments. The principal strictly prefers a U-type tournament if workers receive a rent under limited liability and the costs of increasing precision are low. However, if workers are inequity-averse and have unlimited liability, the J-type tournament leads to lower wage costs.

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Publisher Info
Article provided by LMU Munich School of Management in its journal Schmalenbach Business Review.

Volume (Year): 57 (2005)
Issue (Month): 2 (April)
Pages: 167-192
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Handle: RePEc:sbr:abstra:v:57:y:2005:i:2:p:167-192

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Related research
Keywords: Inequity Aversion; Precision; Tournaments.;

Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
M51 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Firm Employment Decisions; Promotions
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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This page was last updated on 2009-11-11.

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