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On the Competition of Asymmetric Agents

  • Christine Harbring
  • Gabriele K. Lünser
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    Rank-order tournaments are usually implemented in organizations to provide incentives for eliciting employees' effort and/or to identify the agent with the higher ability, for example in promotion tournaments. We close a gap in the literature by experimentally analyzing a ceteris paribus variation of the prize spread - being the major design feature of tournaments - in a symmetric and an asymmetric setting. We find that effort significantly increases with the prize spread as predicted by standard theory. However, only for sufficiently large prize spreads weak players competing against strong players strain themselves all the more and sorting of agents is feasible. Copyright 2008 The Authors. Journal compilation Verein für Socialpolitik and Blackwell Publishing Ltd. 2008.

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0475.2008.00438.x
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    Article provided by Verein für Socialpolitik in its journal German Economic Review.

    Volume (Year): 9 (2008)
    Issue (Month): (08)
    Pages: 373-395

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    Handle: RePEc:bla:germec:v:9:y:2008:i::p:373-395
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    1. R. Cookson, 2000. "Framing Effects in Public Goods Experiments," Experimental Economics, Springer, vol. 3(1), pages 55-79, June.
    2. Lynch, James G., 2005. "The effort effects of prizes in the second half of tournaments," Journal of Economic Behavior & Organization, Elsevier, vol. 57(1), pages 115-129, May.
    3. 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.
    4. Müller, W. & Schotter, A., 2003. "Workaholics and Drop Outs in Optimal Organizations," Discussion Paper 2003-43, Tilburg University, Center for Economic Research.
    5. Grund, Christian & Sliwka, Dirk, 2002. "Envy and Compassion in Tournaments," IZA Discussion Papers 647, Institute for the Study of Labor (IZA).
    6. Ehrenberg, Ronald G & Bognanno, Michael L, 1990. "Do Tournaments Have Incentive Effects?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1307-24, December.
    7. Harbring, Christine & Irlenbusch, Bernd, 2008. "How many winners are good to have?: On tournaments with sabotage," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 682-702, March.
    8. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
    9. Eriksson, Tor, 1999. "Executive Compensation and Tournament Theory: Empirical Tests on Danish Data," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 262-80, April.
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