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U-type versus J-type Tournaments as Alternative Solutions to the Unverifiability Problem

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  • Matthias Kräkel

Abstract

This paper discusses the properties of stylized U.S. ("U-type") and Japanese tournaments ("J-type"), which can both solve the unverifiability problem of labor contracts. Under a zero-profit condition, both tournament types will yield first-best efforts if workers are homogenous and risk neutral. This result will no longer hold for J-type tournaments if the employer has all the bargaining power. However, if workers are rik averse or one worker has a lead a J-type tournament may dominate a U-type tournament.

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File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse3_2002.pdf
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Bibliographic Info

Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse3_2002.

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Length: 45
Date of creation: Jan 2002
Date of revision:
Handle: RePEc:bon:bonedp:bgse3_2002

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Web page: http://www.bgse.uni-bonn.de

Related research

Keywords: Strategic Delegation; Mergers; Oligopoly; Contests;

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References

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  1. Malcomson, James M, 1986. "Rank-Order Contracts for a Principal with Many Agents," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 807-17, October.
  2. Macleod, W.B. & Kanemoto, Y., 1990. "Firm Reputation And Self-Enforcing Labour Contracts," Cahiers de recherche 9026, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  3. Prendergast, Canice & Topel, Robert H, 1996. "Favoritism in Organizations," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 958-78, October.
  4. Laffont, Jean-Jacques, 1990. "Analysis of Hidden Gaming in a Three-Level Hierarchy," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(2), pages 301-24, Fall.
  5. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  6. Green, Jerry & Stokey, Nancy, 1983. "A Comparison of Tournaments and Contracts," Scholarly Articles 3203644, Harvard University Department of Economics.
  7. Fairburn, James A & Malcomson, James M, 2001. "Performance, Promotion, and the Peter Principle," Review of Economic Studies, Wiley Blackwell, vol. 68(1), pages 45-66, January.
  8. Kanemoto, Y. & Macleod, B., 1989. "Optimal Labor Contracts With Non-Contractible Human Capital," UFAE and IAE Working Papers 116-89, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  9. Laffont, Jean-Jacques, 1988. "Hidden Gaming in Hierarchies: Facts and Models," The Economic Record, The Economic Society of Australia, vol. 64(187), pages 295-306, December.
  10. 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.
  11. Prendergast, Canice & Topel, Robert, 1993. "Discretion and bias in performance evaluation," European Economic Review, Elsevier, vol. 37(2-3), pages 355-365, April.
  12. Fairburn, James A. & Malcomson, James M., 1994. "Rewarding performance by promotion to a different job," European Economic Review, Elsevier, vol. 38(3-4), pages 683-690, April.
  13. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1994. "The Wage Policy of a Firm," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 921-55, November.
  14. Malcomson, James M, 1984. "Work Incentives, Hierarchy, and Internal Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 486-507, June.
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Cited by:
  1. Matthias Kräkel, 2006. "Zur Reform der Professorenbesoldung in Deutschland," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 7(1), pages 105-126, 02.

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