Whereas the theoretical literature on organizational reward systems repeatedly points to the importance of tournament models from an efficiency perspective, very few is known about the application and effectiveness of tournament compensation in organizations, especially when contestant heterogeneity is taken into account. While the distorting effects of contestant heterogeneity on tournament incentives have been theoretically analyzed for the two-contestant-case, tournament incentives in a typical organizational context with more than two contestants and with more than one prize, have not been studied so far. In our paper, we analyze these effects theoretically as well as empirically by studying incentive travel sales contests as a quantitatively important component of compensation, and we also present first empirical evidence on (successful and unsuccessful) organizational attempts to reduce contestant heterogeneity by active handicapping and league-building.
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Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number
0075.
Find related papers by JEL classification: M5 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executive Compensation M53 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Training
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