Incentives vs. Selection in Promotion Tournaments: Can a Designer Kill Two Birds with One Stone?
AbstractThis paper studies the performance of promotion tournaments with heterogeneous participants in two dimensions: incentive provision and selection. Our theoretical analysis reveals a trade-off for the tournament designer between the two goals: While total effort is maximized if less heterogeneous participants compete against each other early in the tournament, letting more heterogeneous participants compete early increases the accuracy in selection. Experimental evidence supports our theoretical findings, indicating that the optimal design of promotion tournaments crucially depends on the objectives of the tournament designer. These findings have important implications for the optimal design of promotion tournaments in organizations.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5755.
Length: 29 pages
Date of creation: May 2011
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- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-25 (All new papers)
- NEP-CTA-2011-06-25 (Contract Theory & Applications)
- NEP-EXP-2011-06-25 (Experimental Economics)
- NEP-HRM-2011-06-25 (Human Capital & Human Resource Management)
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- Stracke, Rudi, 2012. "Orchestrating Contests with Heterogeneous Participants," Economics Working Paper Series 1218, University of St. Gallen, School of Economics and Political Science.
- Tanja Hörtnagl & Rudolf Kerschbamer & Rudi Stracke & Uwe Sunde, 2013.
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CESifo Working Paper Series
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"Dynamic Incentive Effects of Relative Performance Pay: A Field Experiment,"
IZA Discussion Papers
7652, Institute for the Study of Labor (IZA).
- Josse Delfgaauw & Robert Dur & Arjan Non & Willem Verbeke, 2010. "Dynamic Incentive Effects of Relative Performance Pay: A Field Experiment," Tinbergen Institute Discussion Papers 10-124/1, Tinbergen Institute, revised 27 Sep 2011.
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