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Dynamically Sabotage-Proof Tournaments

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  • Junichiro Ishida

Abstract

This 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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File URL: http://www.iser.osaka-u.ac.jp/library/dp/2012/DP0838.pdf
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Bibliographic Info

Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0838.

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Date of creation: Mar 2012
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Handle: RePEc:dpr:wpaper:0838

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  1. Michael Waldman, 1983. "Job Assignments, Signalling nad Efficiency," UCLA Economics Working Papers 286, UCLA Department of Economics.
  2. Ariga,Kenn & Brunello,Giorgio & Ohkusa,Yasushi, 2010. "Internal Labour Markets in Japan," Cambridge Books, Cambridge University Press, number 9780521142748, October.
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  8. Ishida, Junichiro, 2004. "Signaling and strategically delayed promotion," Labour Economics, Elsevier, vol. 11(6), pages 687-700, December.
  9. Junichiro Ishida, 2006. "Optimal Promotion Policies with the Looking-Glass Effect," Journal of Labor Economics, University of Chicago Press, vol. 24(4), pages 857-878, October.
  10. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
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  14. Robert Gibbons & Michael Waldman, 1999. "A Theory Of Wage And Promotion Dynamics Inside Firms," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1321-1358, November.
  15. Bernhardt, Dan, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 315-39, April.
  16. Pierre-Andre Chiappori & Bernard Salanie & Julie Valentin, 1999. "Early Starters versus Late Beginners," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 731-760, August.
  17. Kong-Pin Chen, 2003. "Sabotage in Promotion Tournaments," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 119-140, April.
  18. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  19. Hideo Owan, 2004. "Promotion, Turnover, Earnings, and Firm-Sponsored Training," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 955-978, October.
  20. Ishiguro, Shingo, 2004. "Collusion and discrimination in organizations," Journal of Economic Theory, Elsevier, vol. 116(2), pages 357-369, June.
  21. Michael Waldman, 2003. "Ex Ante versus Ex Post Optimal Promotion Rules: The Case of Internal Promotion," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 27-41, January.
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Citations

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Cited by:
  1. Gürtler, Oliver & Münster, Johannes, 2009. "Sabotage in dynamic tournaments," Discussion Papers, Research Unit: Market Processes and Governance SP II 2009-06, Social Science Research Center Berlin (WZB).
  2. Subhasish M. Chowdhury & Oliver Gurtler, 2013. "Sabotage in Contests: A Survey," University of East Anglia Applied and Financial Economics Working Paper Series 051, School of Economics, University of East Anglia, Norwich, UK..
  3. Junichiro Ishida, 2012. "Promotion without Commitment: Signaling, Time Inconsistency and Decentralization of the Firm," ISER Discussion Paper 0843, Institute of Social and Economic Research, Osaka University.
  4. Gürtler, Oliver & Münster, Johannes, 2013. "Rational self-sabotage," Mathematical Social Sciences, Elsevier, vol. 65(1), pages 1-4.

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