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Incentives vs. Selection in Promotion Tournaments: Can a Designer Kill Two Birds with One Stone?

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Author Info

  • Höchtl, Wolfgang

    ()
    (University of Innsbruck)

  • Kerschbamer, Rudolf

    ()
    (University of Innsbruck)

  • Stracke, Rudi

    ()
    (University of Munich)

  • Sunde, Uwe

    ()
    (University of Munich)

Abstract

This 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 Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5755.

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Length: 29 pages
Date of creation: May 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5755

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Related research

Keywords: promotion tournaments; heterogeneity; incentive provision; selection;

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Cited by:
  1. Tanja Hörtnagl & Rudolf Kerschbamer & Rudi Stracke & Uwe Sunde, 2013. "Heterogeneity in Rent-Seeking Contests with Multiple Stages: Theory and Experimental Evidence," CESifo Working Paper Series 4435, CESifo Group Munich.
  2. Delfgaauw, Josse & Dur, Robert & Non, Arjan & Verbeke, Willem, 2013. "Dynamic Incentive Effects of Relative Performance Pay: A Field Experiment," IZA Discussion Papers 7652, Institute for the Study of Labor (IZA).
  3. Stracke, Rudi, 2012. "Orchestrating Contests with Heterogeneous Participants," Economics Working Paper Series 1218, University of St. Gallen, School of Economics and Political Science.

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