Tournaments with price-setting agents
AbstractIn 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 eÂ¤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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Bibliographic InfoPaper provided by University of Stavanger in its series UiS Working Papers in Economics and Finance with number 2009/5.
Length: 31 pages
Date of creation: 02 Sep 2008
Date of revision:
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