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Feedback in Tournaments under Commitment Problems: Theory and Experimental Evidence

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Author Info
Oliver Gürtler () (University of Bonn)
Christine Harbring () (University of Cologne and IZA)

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Abstract

In this paper, we analyze a principal's optimal feedback policy in tournaments. We close a gap in the literature by assuming the principal to be unable to commit to a certain policy at the beginning of the tournament. Our analysis shows that in equilibrium the principal reveals intermediate information regarding the agents’ previous performances if these performances are not too different. Moreover, we investigate a situation where the principal is not able to credibly communicate her information. Having presented our formal analysis, we test these results using data from laboratory experiments. The experimental findings provide some support for the model.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3111.

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Length: 40 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:iza:izadps:dp3111

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Related research
Keywords: tournament; commitment problems; feedback; experiment;

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Find related papers by JEL classification:
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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References listed on IDEAS
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    Other versions:
  3. Barry J. Nalebuff & Joseph E. Stiglitz, 1983. "Prices and Incentives: Towards a General Theory of Compensation and Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 21-43, Spring. [Downloadable!] (restricted)
  4. Weigelt, Keith & Dukerich, Janet & Schotter, Andrew, 1989. "Reactions to discrimination in an incentive pay compensation scheme: A game-theoretic approach," Organizational Behavior and Human Decision Processes, Elsevier, vol. 44(1), pages 26-44, August. [Downloadable!] (restricted)
  5. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-15, September. [Downloadable!] (restricted)
    Other versions:
  6. Christian Grund & Dirk Sliwka, 2005. "Envy and Compassion in Tournaments," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 14(1), pages 187-207, 03. [Downloadable!] (restricted)
    Other versions:
  7. Christine Harbring & Bernd Irlenbusch, 2005. "Incentives in Tournaments with Endogenous Prize Selection," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(4), pages 636-, December.
  8. O'Keeffe, Mary & Viscusi, W Kip & Zeckhauser, Richard J, 1984. "Economic Contests: Comparative Reward Schemes," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 27-56, January. [Downloadable!] (restricted)
  9. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June. [Downloadable!] (restricted)
  10. Hans K. Hvide, 2000. "Tournament Rewards and Risk Taking," Econometric Society World Congress 2000 Contributed Papers 0163, Econometric Society. [Downloadable!]
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  11. Harbring, Christine & Irlenbusch, Bernd, 2004. "Incentives in Tournaments with Endogenous Prize Selection," IZA Discussion Papers 1340, Institute for the Study of Labor (IZA). [Downloadable!]
  12. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn. [Downloadable!] (restricted)
    Other versions:
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