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Information in tournaments under limited liability

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  • Budde, Jörg

Abstract

The problem of designing tournament contracts under limited liability and alternative performance measures is considered. Under risk neutrality, only the best-performing agent receives an extra premium if the liability constraint becomes binding. Under risk aversion, more than one prize is awarded. In both situations, performance measures can be ranked if their likelihood ratio distribution functions differ by a mean-preserving spread. The latter result is applied to questions of contest design and more general forms of relative performance payment.

Suggested Citation

  • Budde, Jörg, 2009. "Information in tournaments under limited liability," Journal of Mathematical Economics, Elsevier, vol. 45(1-2), pages 59-72, January.
  • Handle: RePEc:eee:mateco:v:45:y:2009:i:1-2:p:59-72
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    2. Kräkel, Matthias & Schöttner, Anja, 2010. "Technology Choice and Incentives under Relative Performance Schemes," Bonn Econ Discussion Papers 10/2010, University of Bonn, Bonn Graduate School of Economics (BGSE).

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