Tournaments: There Is More Than Meets the Eye
AbstractBy the well established tournament literature, incomplete information regarding the employees’ productivity is essential for the rationalization of (efficiency-enhancing) tournaments. In this paper we propose an alternative rationalization of tournaments focusing on a fully informed principal whose objective is to maximize a weighted average of the profitability (productivity) of his team and of the promotion-seeking efforts of his employees. Our first main result clarifies the conditions under which the principal has an incentive to create a tournament that determines the promoted employee. We then examine the effect of the employees' productivity on their probability of promotion and on the extent of the resources wasted in the tournament. In particular, we specify the conditions that ensure that the most productive employee (the natural candidate for promotion) is less likely to be promoted and the conditions under which higher employee's productivity results in increased wasted promotion-seeking efforts.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1023.
Length: 21 pages
Date of creation: Feb 2004
Date of revision:
Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Other versions of this item:
- D2 - Microeconomics - - Production and Organizations
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- J2 - Labor and Demographic Economics - - Demand and Supply of Labor
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-29 (All new papers)
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.:
- Edward P. Lazear & Sherwin Rosen, 1979.
"Rank-Order Tournaments as Optimum Labor Contracts,"
NBER Working Papers
0401, National Bureau of Economic Research, Inc.
- Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
- Sherwin Rosen, 1985.
"Prizes and Incentives in Elimination Tournaments,"
NBER Working Papers
1668, National Bureau of Economic Research, Inc.
- Gil S. Epstein & Shmuel Nitzan, 2002. "Politics of Randomness," CESifo Working Paper Series 803, CESifo Group Munich.
- Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).
If references are entirely missing, you can add them using this form.