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Dynamically Sabotage-Proof Tournaments

  • Junichiro Ishida

This article explores the consequences of sabotage for the design of incentive contracts. The possibility of sabotage gives rise to a dynamic concern, similar to the Ratchet effect, which distorts the agents' incentives. We first show that the mere possibility of sabotage may make it impossible to implement the first-best effort, and we then offer two distinct incentive schemes, fast track and late selection, to circumvent this problem. The present model offers a mechanism through which these two schemes arise in a unified framework.

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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 30 (2012)
Issue (Month): 3 ()
Pages: 627 - 655

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Handle: RePEc:ucp:jlabec:doi:10.1086/664945
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