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The League Composition Effect in Tournaments with Heterogeneous Players: An Empirical Analysis of Broiler Contracts

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Author Info

  • Armando Levy

    (Analysis Group/Economics)

  • Tomislav Vukina

    (North Carolina State University)

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    Abstract

    We compare welfare effects of tournaments and piece rates in contracts with heterogeneous ability agents and demonstrate that tournaments that mix players of unequal abilities create a league composition effect. When leagues are fixed and the time horizon sufficiently long, piece rates improve welfare over tournaments. Using contract production data for broiler chickens, we estimate the variances of growers' abilities, common production shock, and grower's idiosyncratic shock. Growers' abilities are heterogeneous, and common production shocks are significant. Leagues in broiler tournaments disintegrate rapidly over time, suggesting that tournament contracts offer more welfare than piece rates.

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    Bibliographic Info

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

    Volume (Year): 22 (2004)
    Issue (Month): 2 (April)
    Pages: 353-378

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    Handle: RePEc:ucp:jlabec:v:22:y:2004:i:2:p:353-378

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

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    Cited by:
    1. Vukina, Tomislav & Zheng, Xiaoyong, 2006. "Structural Estimation of Rank-Order Tournament Games with Private Information," 2006 Annual meeting, July 23-26, Long Beach, CA 21059, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Zheng, Xiaoyong & Vukina, Tomislav, 2007. "Efficiency gains from organizational innovation: Comparing ordinal and cardinal tournament games in broiler contracts," International Journal of Industrial Organization, Elsevier, vol. 25(4), pages 843-859, August.
    3. Heutel, Garth, 2009. "Testing implications of a tournament model of school district salary schedules," Economics of Education Review, Elsevier, vol. 28(1), pages 143-151, February.
    4. Wu, Steven Y. & Roe, Brian E., 2004. "Tournaments, Risk Perceptions, And Fairness," 2004 Annual meeting, August 1-4, Denver, CO 20154, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Marinakis, Kosmas & Tsoulouhas, Theofanis, 2013. "Are tournaments optimal over piece rates under limited liability for the principal?," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 223-237.
    6. Roe, Brian E. & Wu, Steven Y., 2003. "The Welfare Effects Of Banning Tournaments When Commitment Is Impossible: Some Results From The Broiler Sector," 2003 Annual meeting, July 27-30, Montreal, Canada 22151, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Agustín Casas & Yarine Fawaz, 2013. "Altitude as handicap in rank-order football tournaments," Economics Working Papers we1316, Universidad Carlos III, Departamento de Economía.
    8. Hammond, Robert G. & Zheng, Xiaoyong, 2013. "Heterogeneity in tournaments with incomplete information: An experimental analysis," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 248-260.
    9. Wu, Steven Y. & Roe, Brian E., 2003. "Performance And Welfare Effects Of Tournament Contracts: Some Experimental Evidence," 2003 Annual meeting, July 27-30, Montreal, Canada 21938, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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