Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Effects of Prize Spread and Noise in Elimination Tournaments: A Natural Field Experiment

Contents:

Author Info

  • Delfgaauw, Josse

    ()
    (Erasmus University Rotterdam)

  • Dur, Robert

    ()
    (Erasmus University Rotterdam)

  • Non, Arjan

    ()
    (ROA, Maastricht University)

  • Verbeke, Willem

    ()
    (Erasmus University Rotterdam)

Abstract

We conduct a natural field experiment in a large retail chain to test basic predictions of tournament theory regarding prize spread and noise. A random subset of the 208 stores participates in two-stage elimination tournaments. Tournaments differ in the distribution of prize money across winners of the first and second round of the tournament. As predicted by theory, we find that a more convex prize spread increases performance in the second round at the expense of first-round performance, although the magnitude of these effects is small. Moreover, the treatment effect is significantly larger for stores that historically have relatively stable performance as compared to stores with more noisy performance.

Download Info

If 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.
File URL: http://ftp.iza.org/dp6480.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6480.

as in new window
Length: 49 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6480

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

Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:

Related research

Keywords: prize spread; incentives; elimination tournaments; performance measurement; field experiment;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Renault, Régis & Auriol, Emmanuelle, 2008. "Status and incentives," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/12479, Paris Dauphine University.
  2. Delfgaauw, Josse & Dur, Robert & Sol, Joeri & Verbeke, Willem, 2009. "Tournament Incentives in the Field: Gender Differences in the Workplace," IZA Discussion Papers 4395, Institute for the Study of Labor (IZA).
  3. Bandiera, Oriana & Barankay, Iwan & Rasul, Imran, 2012. "Team Incentives: Evidence from a Firm Level Experiment," IZA Discussion Papers 6279, Institute for the Study of Labor (IZA).
  4. John List & David Reiley, 2008. "Field experiments," Artefactual Field Experiments, The Field Experiments Website 00091, The Field Experiments Website.
  5. Jed DeVaro, 2005. "Internal Promotion Competitions in Firms," Labor and Demography, EconWPA 0508005, EconWPA.
  6. Bognanno, Michael L, 2001. "Corporate Tournaments," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 19(2), pages 290-315, April.
  7. Jerry R. Green & Nancy L. Stokey, 1982. "A Comparison of Tournaments and Contracts," NBER Working Papers 0840, National Bureau of Economic Research, Inc.
  8. Bruno S. Frey & Susanne Neckermann, 2008. "Awards: A view from psychological economics," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 357, Institute for Empirical Research in Economics - University of Zurich.
  9. Ehrenberg, Ronald G & Bognanno, Michael L, 1990. "Do Tournaments Have Incentive Effects?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(6), pages 1307-24, December.
  10. Jordi Blanes i Vidal & Mareike Nossol, 2011. "Tournaments Without Prizes: Evidence from Personnel Records," Management Science, INFORMS, INFORMS, vol. 57(10), pages 1721-1736, October.
  11. Fu, Qiang & Lu, Jingfeng, 2006. "The optimal multi-stage contest," MPRA Paper 946, University Library of Munich, Germany.
  12. Edward P. Lazear & Paul Oyer, 2007. "Personnel Economics," NBER Working Papers 13480, National Bureau of Economic Research, Inc.
  13. Benny Moldovanu & Aner Sela & Xianwen Shi, 2007. "Contests for Status," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 115, pages 338-363.
  14. Gary Charness & Peter J. Kuhn, 2010. "Lab Labor: What Can Labor Economists Learn from the Lab?," NBER Working Papers 15913, National Bureau of Economic Research, Inc.
  15. Delfgaauw, Josse & Dur, Robert & Non, Arjan & Verbeke, Willem, 2014. "Dynamic incentive effects of relative performance pay: A field experiment," Labour Economics, Elsevier, Elsevier, vol. 28(C), pages 1-13.
  16. Rick Audas & Tim Barmby & John Treble, 2004. "Luck, Effort, and Reward in an Organizational Hierarchy," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 22(2), pages 379-396, April.
  17. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 841-64, October.
  18. Gibbs, Michael, 1995. "Incentive compensation in a corporate hierarchy," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 19(2-3), pages 247-277, April.
  19. Altmann, Steffen & Falk, Armin & Wibral, Matthias, 2008. "Promotions and Incentives: The Case of Multi-Stage Elimination Tournaments," IZA Discussion Papers 3835, Institute for the Study of Labor (IZA).
  20. Azmat, Ghazala & Iriberri, Nagore, 2010. "The importance of relative performance feedback information: Evidence from a natural experiment using high school students," Journal of Public Economics, Elsevier, Elsevier, vol. 94(7-8), pages 435-452, August.
  21. repec:rje:randje:v:37:y:2006:3:p:521-542 is not listed on IDEAS
  22. Eriksson, Tor, 1999. "Executive Compensation and Tournament Theory: Empirical Tests on Danish Data," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(2), pages 262-80, April.
  23. McCue, Kristin, 1996. "Promotions and Wage Growth," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 14(2), pages 175-209, April.
  24. O'Keeffe, Mary & Viscusi, W Kip & Zeckhauser, Richard J, 1984. "Economic Contests: Comparative Reward Schemes," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 2(1), pages 27-56, January.
  25. Knoeber, Charles R & Thurman, Walter N, 1994. "Testing the Theory of Tournaments: An Empirical Analysis of Broiler Production," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 12(2), pages 155-79, April.
  26. Michael Kosfeld & Susanne Neckermann, 2011. "Getting More Work for Nothing? Symbolic Awards and Worker Performance," American Economic Journal: Microeconomics, American Economic Association, American Economic Association, vol. 3(3), pages 86-99, August.
  27. Waldman, Michael, 2007. "Theory and evidence in internal labor markets," MPRA Paper 5113, University Library of Munich, Germany.
  28. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1985. "Tournaments and Piece Rates: An Experimental Study," Working Papers, C.V. Starr Center for Applied Economics, New York University 85-21, C.V. Starr Center for Applied Economics, New York University.
  29. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(3), pages 561-80, June.
  30. Richard B. Freeman & Alexander M. Gelber, 2010. "Prize Structure and Information in Tournaments: Experimental Evidence," American Economic Journal: Applied Economics, American Economic Association, American Economic Association, vol. 2(1), pages 149-64, January.
  31. Murphy, Kevin J., 1985. "Corporate performance and managerial remuneration : An empirical analysis," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 7(1-3), pages 11-42, April.
  32. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, American Economic Association, vol. 76(4), pages 701-15, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Delfgaauw, Josse & Dur, Robert & Non, Arjan & Verbeke, Willem, 2014. "Dynamic incentive effects of relative performance pay: A field experiment," Labour Economics, Elsevier, Elsevier, vol. 28(C), pages 1-13.
  2. Stracke, Rudi & Höchtl, Wolfgang & Kerschbamer, Rudolf & Sunde, Uwe, 2013. "Optimal Prizes in Dynamic Elimination Contests: An Experimental Analysis," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order, Verein für Socialpolitik / German Economic Association 79883, Verein für Socialpolitik / German Economic Association.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp6480. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.