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Promotions and Incentives: The Case of Multistage Elimination Tournaments

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  • Steffen Altmann
  • Armin Falk
  • Matthias Wibral

Abstract

Promotions play an important role for the provision of incentives in firms. We analyze incentives in multistage elimination tournaments with controlled laboratory experiments. In our two main treatments, we compare a two-stage tournament to a one-stage tournament. Subjects in the two-stage treatment provide excess effort in the first stage, both with respect to Nash predictions and compared to the strategically equivalent one-stage tournament. Additional control treatments confirm that excess effort in early stages is a robust finding and suggest that above-equilibrium effort might be driven by limited degrees of forward-looking behavior and subjects deriving nonmonetary value from competing.

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File URL: http://www.jstor.org/stable/full/10.1086/662130
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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 30 (2012)
Issue (Month): 1 ()
Pages: 149 - 174

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Handle: RePEc:ucp:jlabec:doi:10.1086/662130

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References

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  1. Bognanno, Michael L, 2001. "Corporate Tournaments," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 290-315, April.
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  4. Thomas Dohmen & Armin Falk, 2011. "Performance Pay and Multidimensional Sorting: Productivity, Preferences, and Gender," American Economic Review, American Economic Association, vol. 101(2), pages 556-90, April.
  5. Christian Belzil & Michael Bognanno, 2006. "Promotions, Demotions, Halo Effects and Earnings Dynamics of American Executives," Working Papers 0606, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  6. Ehrenberg, Ronald G & Bognanno, Michael L, 1990. "Do Tournaments Have Incentive Effects?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1307-24, December.
  7. Eriksson, Tor & Teyssier, Sabrina & Villeval, Marie Claire, 2006. "Self-Selection and the Efficiency of Tournaments," IZA Discussion Papers 1983, Institute for the Study of Labor (IZA).
  8. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987. "Tournaments and Piece Rates: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 1-33, February.
  9. Eriksson, Tor, 1999. "Executive Compensation and Tournament Theory: Empirical Tests on Danish Data," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 262-80, April.
  10. Knoeber, Charles R & Thurman, Walter N, 1994. "Testing the Theory of Tournaments: An Empirical Analysis of Broiler Production," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 155-79, April.
  11. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Internal Economics of the Firm: Evidence from Personnel Data," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 881-919, November.
  12. Christian Belzil & Michael Bognanno, 2008. "Promotions, Demotions, Halo Effects, and the Earnings Dynamics of American Executives," Journal of Labor Economics, University of Chicago Press, vol. 26(2), pages 287-310, 04.
  13. Harbring, Christine & Irlenbusch, Bernd, 2003. "An experimental study on tournament design," Labour Economics, Elsevier, vol. 10(4), pages 443-464, August.
  14. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  15. Moldovanu, Benny & Sela, Aner & Shi, Xianwen, 2005. "Contests for Status," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 139, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  16. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  17. Harbring, Christine & Irlenbusch, Bernd, 2008. "How many winners are good to have?: On tournaments with sabotage," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 682-702, March.
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Citations

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Cited by:
  1. Tanja Hörtnagl & Rudolf Kerschbamer & Rudi Stracke & Uwe Sunde, 2013. "Heterogeneity in Rent-Seeking Contests with Multiple Stages: Theory and Experimental Evidence," CESifo Working Paper Series 4435, CESifo Group Munich.
  2. Cary Deck & Erik O. Kimbrough, 2014. "Single- and Double-Elimination All-Pay Tournaments," Working Papers 14-10, Chapman University, Economic Science Institute.
  3. Herbst, Luisa & Konrad, Kai A. & Morath, Florian, 2013. "Endogenous group formation in experimental contests," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 419, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  4. Magnus Hoffmann & Martin Kolmar, 2013. "Distributional Preferences in Probabilistic and Share Contests," CESifo Working Paper Series 4184, CESifo Group Munich.
  5. Mirco Tonin & Michael Vlassopoulos, 2013. "Social Incentives Matter: Evidence from an Online Real Effort Experiment," Working Papers 2013.05, Fondazione Eni Enrico Mattei.
  6. Charness, Gary & Cobo-Reyes, Ramón & Lacomba, Juan A. & Lagos, Francisco & Pérez, José María, 2013. "Social Comparisons in Wage Delegation: Experimental Evidence," IZA Discussion Papers 7802, Institute for the Study of Labor (IZA).
  7. Josse Delfgaauw & Robert Dur & Arjan Non & Willem Verbeke, 2011. "The Effects of Prize Spread and Noise in Elimination Tournaments: A Natural Field Experiment," Tinbergen Institute Discussion Papers 11-120/1, Tinbergen Institute, revised 03 Oct 2013.
  8. Stracke, Rudi & Höchtl, Wolfgang & Kerschbamer, Rudolf & Sunde, Uwe, 2013. "Optimal Prizes in Dynamic Elimination Contests: An Experimental Analysis," Munich Reprints in Economics 19572, University of Munich, Department of Economics.
  9. Mirco Tonin & Michael Vlassopoulos, 2014. "Corporate Philanthropy and Productivity: Evidence from an Online Real Effort Experiment," CESifo Working Paper Series 4778, CESifo Group Munich.
  10. Rudi Stracke & Wolfgang Höchtl & Rudolf Kerschbamer & Uwe Sunde, 2014. "Optimal prizes in dynamic elimination contests: Theory and experimental evidence," Working Papers 2014-08, Faculty of Economics and Statistics, University of Innsbruck.
  11. repec:dgr:uvatin:2011120 is not listed on IDEAS
  12. Shakun D. Mago & Roman M. Sheremeta, 2012. "Multi-Battle Contests: An Experimental Study," Working Papers 12-06, Chapman University, Economic Science Institute.
  13. Stefano Caria & Paolo Falco, 2014. "Do employers trust workers too little? An experimental study of trust in the labour market," CSAE Working Paper Series 2014-07, Centre for the Study of African Economies, University of Oxford.

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