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Self-selection and the Efficiency of Tournaments

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Author Info

  • Tor Eriksson

    ()
    (Department of economics - University of Aarhus)

  • Sabrina Teyssier

    ()
    (Thurgau Institute of Economics - Universität Konstanz)

  • Marie Claire Villeval

    ()
    (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon - Université Jean Monnet - Saint-Etienne - Université Claude Bernard - Lyon I)

Abstract

The literature has shown that the overall efficiency of exogenously imposed tournaments is reduced by a high variance in performance. This paper reports results from an experiment analyzing whether allowing subjects to self-select into different payment schemes is reducing the variability of performance in tournaments. We show that when the subjects choose to enter a tournament instead of a piece-rate payment scheme, the average effort is higher and the between-subject variance is substantially lower than when the same payment scheme is imposed. Mainly based on risk aversion, sorting is efficiency-enhancing since it increases the homogeneity of the contestants.

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File URL: http://halshs.archives-ouvertes.fr/docs/00/45/16/00/PDF/EconInquiry_Sel_selection.pdf
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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00451600.

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Date of creation: 2009
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Publication status: Published, Economic Inquiry, 2009, 47, 3, pp. 530-548
Handle: RePEc:hal:journl:halshs-00451600

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00451600
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Web page: http://hal.archives-ouvertes.fr/

Related research

Keywords: Tournament; Performance Pay ; Incentives ; Sorting ; Selection ; Experiment;

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  1. Marie-Claire Villeval & Tor Eriksson, 2004. "Other-Regarding Preferences and Performance Pay – An Experiment on Incentives and Sorting," Working Papers 0408, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  2. Bohnet, Iris & Kubler, Dorothea, 2005. "Compensating the cooperators: is sorting in the prisoner's dilemma possible?," Journal of Economic Behavior & Organization, Elsevier, vol. 56(1), pages 61-76, January.
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  7. Nabanita Datta Gupta & Anders Poulsen & Marie-Claire Villeval, 2005. "Male and Female Competitive Behavior: Experimental," Post-Print halshs-00175039, HAL.
  8. Charles Bellemare & Bruce S. Shearer, 2006. "Sorting, Incentives and Risk Preferences: Evidence from a Field Experiment," Cahiers de recherche 0631, CIRPEE.
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  23. Hvide, Hans K. & Kristiansen, Eirik G., 2003. "Risk taking in selection contests," Games and Economic Behavior, Elsevier, vol. 42(1), pages 172-179, January.
  24. Edward Lazear & Ulrike Malmendier & Roberto Weber, 2006. "Sorting, Prices, and Social Preferences," NBER Working Papers 12041, National Bureau of Economic Research, Inc.
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  26. Nalbantian, Haig R & Schotter, Andrew, 1997. "Productivity under Group Incentives: An Experimental Study," American Economic Review, American Economic Association, vol. 87(3), pages 314-41, June.
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  29. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  30. Main, Brian G M & O'Reilly, Charles A, III & Wade, James, 1993. "Top Executive Pay: Tournament or Teamwork?," Journal of Labor Economics, University of Chicago Press, vol. 11(4), pages 606-28, October.
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