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Dynamically Sabotage-Proof Tournaments

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  • Junichiro Ishida

Abstract

This article explores the consequences of sabotage for the design of incentive contracts. The possibility of sabotage gives rise to a dynamic concern, similar to the Ratchet effect, which distorts the agents’ incentives. We first show that the mere possibility of sabotage may make it impossible to implement the first-best effort, and we then offer two distinct incentive schemes, fast track and late selection, to circumvent this problem. The present model offers a mechanism through which these two schemes arise in a unified framework.

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File URL: http://www.jstor.org/stable/pdfplus/10.1086/664945
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File URL: http://www.jstor.org/stable/full/10.1086/664945
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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): 3 ()
Pages: 627 - 655

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Handle: RePEc:ucp:jlabec:doi:10.1086/664945

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Web page: http://www.journals.uchicago.edu/JOLE/

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  1. Michael Waldman, 1983. "Job Assignments, Signalling nad Efficiency," UCLA Economics Working Papers 286, UCLA Department of Economics.
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  9. Hideo Owan, 2004. "Promotion, Turnover, Earnings, and Firm-Sponsored Training," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 955-978, October.
  10. Margaret A. MEYER, 1992. "Biased Contests and Moral Hazard: Implications for Career Profiles," Annales d'Economie et de Statistique, ENSAE, issue 25-26, pages 165-187.
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  15. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  16. Ishida, Junichiro, 2004. "Signaling and strategically delayed promotion," Labour Economics, Elsevier, vol. 11(6), pages 687-700, December.
  17. Hodaka Morita, 2005. "Multi-skilling, Delegation and Continuous Process Improvement: A Comparative Analysis of US-Japanese Work Organizations," Economica, London School of Economics and Political Science, vol. 72(285), pages 69-93, 02.
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Citations

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Cited by:
  1. Gürtler, Oliver & Münster, Johannes, 2009. "Sabotage in dynamic tournaments," Discussion Papers, Research Unit: Market Processes and Governance SP II 2009-06, Social Science Research Center Berlin (WZB).
  2. Gürtler, Oliver & Münster, Johannes, 2013. "Rational self-sabotage," Mathematical Social Sciences, Elsevier, vol. 65(1), pages 1-4.
  3. Junichiro Ishida, 2012. "Promotion without Commitment: Signaling, Time Inconsistency and Decentralization of the Firm," ISER Discussion Paper 0843, Institute of Social and Economic Research, Osaka University.
  4. Subhasish M. Chowdhury & Oliver Gurtler, 2013. "Sabotage in Contests: A Survey," University of East Anglia Applied and Financial Economics Working Paper Series 051, School of Economics, University of East Anglia, Norwich, UK..

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