Dynamically Sabotage-Proof Tournaments
AbstractThis paper 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 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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Bibliographic InfoPaper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0838.
Date of creation: Mar 2012
Date of revision:
Other versions of this item:
- NEP-ALL-2012-04-03 (All new papers)
- NEP-CTA-2012-04-03 (Contract Theory & Applications)
- NEP-HRM-2012-04-03 (Human Capital & Human Resource Management)
- NEP-MIC-2012-04-03 (Microeconomics)
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