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Structural Estimation of Rank-Order Tournament Games with Private Information

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  • Vukina, Tomislav
  • Zheng, Xiaoyong

Abstract

In this paper we propose a game-theoretic model of a rank-order tournament with private information and characterize its equilibrium solution. The model captures many important features of the production contracts once observed in the poultry industry. We use the contract settlement data from a poultry company who used rank-order tournaments to remunerate their contract growers and estimate a fully structural model of a symmetric Nash-equilibrium of this game. We show that growers' equilibrium effort depends on three factors: the spread in piece rates between the performance brackets, the number of players in each tournament, and the number of performance brackets used. We use the estimates of the productivity shocks density to simulate how changes in these three tournament characteristics affect the total welfare and the distribution of welfare between the growers and the integrator.

Suggested Citation

  • 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).
    • Handle: RePEc:ags:aaea06:21059
    DOI: 10.22004/ag.econ.21059
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    1. Grau, Nicolás, 2018. "The impact of college admissions policies on the academic effort of high school students," Economics of Education Review, Elsevier, vol. 65(C), pages 58-92.

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