IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v122y2014i2p211-214.html
   My bibliography  Save this article

Tournaments with gaps

Author

Listed:
  • Imhof, Lorens
  • Kräkel, Matthias

Abstract

A standard tournament contract specifies only tournament prizes. If agents’ performance is measured on a cardinal scale, the principal can complement the tournament contract by a gap which defines the minimum distance by which the best performing agent must beat the second best to receive the winner prize. We analyze a tournament with two risk averse agents. Under unlimited liability, the principal strictly benefits from a gap by partially insuring the agents and thereby reducing labor costs. If the agents are protected by limited liability, the principal sticks to the standard tournament.

Suggested Citation

  • Imhof, Lorens & Kräkel, Matthias, 2014. "Tournaments with gaps," Economics Letters, Elsevier, vol. 122(2), pages 211-214.
  • Handle: RePEc:eee:ecolet:v:122:y:2014:i:2:p:211-214
    DOI: 10.1016/j.econlet.2013.11.018
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176513005120
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    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. Gürtler, Oliver, 2011. "The first-order approach in rank-order tournaments," Economics Letters, Elsevier, vol. 111(3), pages 185-187, June.
    3. Imhof, Lorens & Kräkel, Matthias, 2014. "Bonus pools and the informativeness principle," European Economic Review, Elsevier, vol. 66(C), pages 180-191.
    4. Pratt, John W & Zeckhauser, Richard J, 1987. "Proper Risk Aversion," Econometrica, Econometric Society, vol. 55(1), pages 143-154, January.
    5. Barry J. Nalebuff & Joseph E. Stiglitz, 1983. "Prices and Incentives: Towards a General Theory of Compensation and Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 21-43, Spring.
    6. Hisaki Kono & Nobuyuki Yagi, 2008. "Heterogeneous Contests And Less Informative Signals," The Japanese Economic Review, Japanese Economic Association, vol. 59(1), pages 113-126.
    7. Anja Schöttner, 2008. "Fixed-prize tournaments versus first-price auctions in innovation contests," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 35(1), pages 57-71, April.
    8. Prendergast, Canice & Topel, Robert H, 1996. "Favoritism in Organizations," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 958-978, October.
    9. James M. Malcomson, 1986. "Rank-Order Contracts for a Principal with Many Agents," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 807-817.
    10. Malcomson, James M, 1984. "Work Incentives, Hierarchy, and Internal Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 486-507, June.
    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


    Cited by:

    1. repec:eee:ecolet:v:163:y:2018:i:c:p:1-5 is not listed on IDEAS
    2. Gelder, Alan & Kovenock, Dan & Sheremeta, Roman, 2015. "Behavior in All-Pay Auctions with Ties," MPRA Paper 67517, University Library of Munich, Germany.
    3. Alberto Vesperoni, 2016. "A contest success function for rankings," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(4), pages 905-937, December.

    More about this item

    Keywords

    Contest; Contract; Moral hazard; Risk aversion; Unlimited liability;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:122:y:2014:i:2:p:211-214. 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: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.