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Feedback in Tournaments under Commitment Problems: The-ory and Experimental Evidence

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  • Gürtler, Oliver
  • Harbring, Christine

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 in-termediate 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 credi-bly 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.

Suggested Citation

  • Gürtler, Oliver & Harbring, Christine, 2007. "Feedback in Tournaments under Commitment Problems: The-ory and Experimental Evidence," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 219, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:219
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    File URL: https://epub.ub.uni-muenchen.de/13333/1/219.pdf
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    References listed on IDEAS

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    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Hans K. Hvide, 2002. "Tournament Rewards and Risk Taking," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 877-898, October.
    3. Alannah Orrison & Andrew Schotter & Keith Weigelt, 2004. "Multiperson Tournaments: An Experimental Examination," Management Science, INFORMS, vol. 50(2), pages 268-279, February.
    4. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-715, September.
    5. Christian Grund & Dirk Sliwka, 2005. "Envy and Compassion in Tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 187-207, March.
    6. 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.
    7. Christine Harbring & Bernd Irlenbusch & Matthias Krakel & Reinhard Selten, 2007. "Sabotage in Corporate Contests - An Experimental Analysis," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(3), pages 367-392.
    8. Aoyagi, Masaki, 2010. "Information feedback in a dynamic tournament," Games and Economic Behavior, Elsevier, vol. 70(2), pages 242-260, November.
    9. 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.
    10. 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.
    11. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-580, June.
    12. Harbring, Christine & Irlenbusch, Bernd, 2004. "Incentives in Tournaments with Endogenous Prize Selection," IZA Discussion Papers 1340, Institute of Labor Economics (IZA).
    13. 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 636-663, December.
    14. Grossman, S J & Hart, O D, 1980. "Disclosure Laws and Takeover Bids," Journal of Finance, American Finance Association, vol. 35(2), pages 323-334, May.
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    Cited by:

    1. Eriksson, Tor & Poulsen, Anders & Villeval, Marie Claire, 2009. "Feedback and incentives: Experimental evidence," Labour Economics, Elsevier, vol. 16(6), pages 679-688, December.
    2. Bernd Frick & Oliver Gürtler & Joachim Prinz, 2008. "Anreize in Turnieren mit heterogenen Teilnehmern — Eine empirische Untersuchung mit Daten aus der Fußball-Bundesliga," Schmalenbach Journal of Business Research, Springer, vol. 60(4), pages 385-405, June.

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    More about this item

    Keywords

    tournament; commitment problems; feedback; experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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