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Yes Men in Tournaments

  • Jason G. Cummins
  • Ingmar Nyman

We study a rank-order tournament in which employees acquire and use private information for an investment decision. In this environment, competition can turn employees into yes men who make investment decisions that excessively agree with preconceived notions. The specter of yes-man behavior may drive the tournament incentive intensity and the employees' information-collection effort either to zero or above the first-best efficient levels. We also show that yes-man problems are alleviated by a stronger correlation between the employees' sources of uncertainty and by the use of individual compensation contracts rather than a tournament.

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

Volume (Year): 169 (2013)
Issue (Month): 4 (December)
Pages: 621-659

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201312)169:4_621:ymit_2.0.tx_2-2
DOI: 10.1628/093245613X13806312325779
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  1. Dye, Ronald A, 1984. "The Trouble with Tournaments," Economic Inquiry, Western Economic Association International, vol. 22(1), pages 147-49, January.
  2. 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.
  3. Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988. " Compensation and Incentives: Practice vs. Theory," Journal of Finance, American Finance Association, vol. 43(3), pages 593-616, July.
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  6. Paul Heidhues & Johan Lagerlöf, 2000. "Hiding Information in Electoral Competition," CIG Working Papers FS IV 00-06, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG), revised Feb 2002.
  7. 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.
  8. Matthew Gentzkow & Jesse Shapiro, 2005. "Media Bias and Reputation," NBER Working Papers 11664, National Bureau of Economic Research, Inc.
  9. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  10. Jason G. Cummins & Ingmar Nyman, 2005. "The Dark Side of Competitive Pressure," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 361-397, Summer.
  11. Prendergast, Canice & Stole, Lars, 1996. "Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1105-34, December.
  12. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  13. Lorne Carmichael, 1981. "Firm-Specific Human Capital and Promotion Ladders," Working Papers 452, Queen's University, Department of Economics.
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