This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Pooling, Separating, and Cream-Skimming In Relative-Performance Contracts

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Wang, Yanguo
Jaenicke, Edward
Abstract

Existing research on tournament-style contests suggests that mechanisms to sort contestants by ability level are unnecessary in the case of linear relative-performance contracts. This paper suggests that this result stems from uniform treatment of workers' marginal returns from effort, marginal disutilities of effort, and reservation wages. Here, we investigate relative-performance contracts with a model that allows these three factors to vary by growers' unobservable ability. Given this framework, we find that it is possible for processors to improve expected profits and total expected welfare by replacing a single contract offering meant to pool all growers with an offering of two contracts meant to separate growers by ability. Under some circumstances, a 'cream-skimming' contract offering designed to attract only workers above a minimum ability level can also improve expected profits.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://purl.umn.edu/19522
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2005 Annual meeting, July 24-27, Providence, RI with number 19522.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 2005
Date of revision:
Handle: RePEc:ags:aaea05:19522

Contact details of provider:
Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202
Phone: (414) 918-3190
Fax: (414) 276-3349
Email:
Web page: http://www.aaea.org
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (AgEcon Search).

Related research
Keywords: Labor and Human Capital;

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Marchand, Maurice & Sato, Motohiro & Schokkaert, Erik, 2003. " Prior Health Expenditures and Risk Sharing with Insurers Competing on Quality," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 647-69, Winter.
  2. Asheim, Geir B. & Nilssen, Tore, 1996. "Non-discriminating renegotiation in a competitive insurance market," European Economic Review, Elsevier, vol. 40(9), pages 1717-1736, December. [Downloadable!] (restricted)
    Other versions:
  3. 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. [Downloadable!] (restricted)
  4. Lewis Tracy R. & Sappington David E. M., 1995. "Insurance, Adverse Selection, and Cream-Skimming," Journal of Economic Theory, Elsevier, vol. 65(2), pages 327-358, April. [Downloadable!] (restricted)
  5. Kahn, Charles M, 1985. "Optimal Severance Pay with Incomplete Information," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 435-51, June. [Downloadable!] (restricted)
  6. McLaughlin, Kenneth J, 1991. "A Theory of Quits and Layoffs with Efficient Turnover," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 1-29, February. [Downloadable!] (restricted)
  7. Barros, Pedro Pita, 2003. "Cream-skimming, incentives for efficiency and payment system," Journal of Health Economics, Elsevier, vol. 22(3), pages 419-443, May. [Downloadable!] (restricted)
  8. B. Mak Arvin & Richard J. Arnott, 1992. "Wage Profiles and Imperfect Capital Markets: A Positive Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 25(3), pages 521-37, August. [Downloadable!] (restricted)
  9. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October. [Downloadable!] (restricted)
    Other versions:
  10. Carmichael, H Lorne, 1990. "Efficiency Wage Models of Unemployment--One View," Economic Inquiry, Oxford University Press, vol. 28(2), pages 269-95, April.
  11. Bhattacharya, Sudipto & Guasch, J Luis, 1988. "Heterogeneity, Tournaments, and Hierarchies," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 867-81, August. [Downloadable!] (restricted)
  12. Nalebuff, Barry J & Stiglitz, Joseph E, 1983. "Information, Competition, and Markets," American Economic Review, American Economic Association, vol. 73(2), pages 278-83, May. [Downloadable!] (restricted)
  13. Arnott, Richard J & Hosios, Arthur J & Stiglitz, Joseph E, 1988. "Implicit Contracts, Labor Mobility, and Unemployment," American Economic Review, American Economic Association, vol. 78(5), pages 1046-66, December. [Downloadable!] (restricted)
    Other versions:
  14. Tsoulouhas, Theofanis & Vukina, Tomislav, 2001. " Regulating Broiler Contracts: Tournaments versus Fixed Performance Standards," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 83(4), pages 1062-73, November. [Downloadable!] (restricted)
    Other versions:
  15. Bloemen, H.G. & Stancanelli, E.G.F., 1997. "Individual wealth, reservation wages and transitions into employment," Discussion Paper 2, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
Full references

Statistics
Access and download statistics

Did you know? RePEc also has a blog.

This page was last updated on 2009-11-26.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.