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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. Chan, William, 1996. "External Recruitment versus Internal Promotion," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 14(4), pages 555-70, October.
  2. Meyer, Margaret A, 1992. "Biased Contests and Moral Hazard: Implications for Career Profiles," CEPR Discussion Papers, C.E.P.R. Discussion Papers 637, C.E.P.R. Discussion Papers.
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  8. Robert Gibbons & Michael Waldman, 1999. "A Theory Of Wage And Promotion Dynamics Inside Firms," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(4), pages 1321-1358, November.
  9. Ishida, Junichiro, 2004. "Signaling and strategically delayed promotion," Labour Economics, Elsevier, vol. 11(6), pages 687-700, December.
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  15. Junichiro Ishida, 2006. "Optimal Promotion Policies with the Looking-Glass Effect," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 24(4), pages 857-878, October.
  16. Ariga,Kenn & Brunello,Giorgio & Ohkusa,Yasushi, 2010. "Internal Labour Markets in Japan," Cambridge Books, Cambridge University Press, number 9780521142748, 9.
  17. Michael Waldman, 2003. "Ex Ante versus Ex Post Optimal Promotion Rules: The Case of Internal Promotion," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 41(1), pages 27-41, January.
  18. Gibbons, Robert & Waldman, Michael, 1999. "Careers in organizations: Theory and evidence," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 36, pages 2373-2437 Elsevier.
  19. Hideo Owan, 2004. "Promotion, Turnover, Earnings, and Firm-Sponsored Training," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 22(4), pages 955-978, October.
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Cited by:
  1. Gürtler, Oliver & Münster, Johannes, 2009. "Sabotage in dynamic tournaments," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 266, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  2. Junichiro Ishida, 2012. "Promotion without Commitment: Signaling, Time Inconsistency and Decentralization of the Firm," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0843, Institute of Social and Economic Research, Osaka University.
  3. Gürtler, Oliver & Münster, Johannes, 2013. "Rational self-sabotage," Mathematical Social Sciences, Elsevier, Elsevier, vol. 65(1), pages 1-4.
  4. Subhasish M. Chowdhury & Oliver Gurtler, 2013. "Sabotage in Contests: A Survey," University of East Anglia Applied and Financial Economics Working Paper Series, School of Economics, University of East Anglia, Norwich, UK. 051, School of Economics, University of East Anglia, Norwich, UK..

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