Eriksen, Kristoffer W. () (Norwegian School of Hotel Management, Dept. of Business Administration, University of Stavanger) Kvaløy, Ola () (Norwegian School of Hotel Management, Dept. of Business Administration, University of Stavanger) Olsen, Trond E. () (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
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In many tournaments it is the contestants themselves who determine reward allocation. Labor-union members bargain over wage distribution, and many firms allow self-managed teams to freely determine internal resource allocation, incentive structure, and division of labour. We analyze, and test experimentally, a rank-order tournament where heterogenous agents determine the spread between winner prize and looser prize. We investigate the relationship between prize spread, uncertainty (i.e. noise between e¤ort and performance), heterogeneity and effort. The paper challenges well-known results from tournament theory. We find that a large prize spread is associated with low degree of uncertainty and high degree of heterogeneity, and that heterogeneity triggers effort. By and large, our real-effort experiment supports the theoretical predictions.
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Paper provided by Department of Finance and Management Science, Norwegian School of Economics and Business Administration in its series Discussion Papers with number
2008/23.
Length: 31 pages Date of creation: 17 Oct 2008 Date of revision: Handle: RePEc:hhs:nhhfms:2008_023
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Find related papers by JEL classification: C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Riis, Christian, 2008.
"Efficient Contests,"
MPRA Paper
10906, University Library of Munich, Germany.
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