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Classic promotion tournaments versus market-based tournaments

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  • Waldman, Michael

Abstract

As initially formulated in the seminal analysis of Lazear and Rosen (1981), an important perspective for understanding the role of promotions in firms is the tournament perspective. That is, a promotion and, in particular, the wage increase associated with a promotion is a prize that serves as an incentive for workers to exert effort and take other actions beneficial to the firm such as the accumulation of human capital. In this paper I consider whether the best way to model promotion tournaments is by having firms commit to prizes ex ante as in Lazear and Rosen's initial formulation, or whether promotion prizes should be modeled as arising from the signaling role of promotions and the competition between firms for promoted workers.

Suggested Citation

  • Waldman, Michael, 2013. "Classic promotion tournaments versus market-based tournaments," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 198-210.
  • Handle: RePEc:eee:indorg:v:31:y:2013:i:3:p:198-210
    DOI: 10.1016/j.ijindorg.2012.02.003
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    More about this item

    Keywords

    Tournaments; Promotions; Signaling;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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