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Incentives in Tournaments with Endogenous Prize Selection

  • Christine Harbring
  • Bernd Irlenbusch

Tournament incentive schemes offer payments dependent on relative performance and are intended thereby to motivate agents to exert productive effort. Unfortunately, however, an agent may also be tempted to degrade the production of his competitors in order to improve the own relative position. We investigate whether this sabotage problem is mitigated in a repeated interaction between the agents and the principal. As sabotage can hardly be observed in real-world organizations, we employ a controlled experiment. Our data provide clear evidence that agents' behavior is not only guided by competition between agents but also by the possibility of punishing the principal via sabotage.

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Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 161 (2005)
Issue (Month): 4 (December)
Pages: 636-

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200512)161:4_636:iitwep_2.0.tx_2-x
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  1. Christian Grund & Dirk Sliwka, 2005. "Envy and Compassion in Tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 187-207, 03.
  2. Jerry R. Green & Nancy L. Stokey, 1982. "A Comparison of Tournaments and Contracts," NBER Working Papers 0840, National Bureau of Economic Research, Inc.
  3. 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.
  4. Charness, Gary B, 1999. "Responsibility And Effort In An Experimental Labor Market," University of California at Santa Barbara, Economics Working Paper Series qt7x98w91h, Department of Economics, UC Santa Barbara.
  5. Georg Kirchsteiger & Ernst Fehr & Simon Gächter, 1997. "Reciprocity as a contract enforcement device: experimental evidence," ULB Institutional Repository 2013/5911, ULB -- Universite Libre de Bruxelles.
  6. Uri Gneezy & Muriel Niederle & Aldo Rustichini, 2003. "Performance in Competitive Environments: Gender Differences," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 1049-1074.
  7. Drago, Robert & Garvey, Gerald T, 1998. "Incentives for Helping on the Job: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 1-25, January.
  8. Abbink, Klaus & Abdolkarim Sadrieh, 1995. "RatImage - research Assistance Toolbox for Computer-Aided Human Behavior Experiments," Discussion Paper Serie B 325, University of Bonn, Germany.
  9. Dominique Demougin & Claude Fluet, 2003. "Inequity Aversion in Tournaments," Cahiers de recherche 0322, CIRPEE.
  10. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987. "Tournaments and Piece Rates: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 1-33, February.
  11. repec:sae:ilrrev:v:43:y:1990:i:3:p:74-88 is not listed on IDEAS
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