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Splitting Leagues

  • Matthias Kräkel

Splitting leagues or tournaments seems to be puzzling when agents are homogeneous and splitting leads to a negative competition effect. However, it can be shown that the principal can nevertheless benefit from splitting. First, splitting can be used as a divide-and-rule strategy by the principal to create additional incentives when collusion among the agents is possible. Second, splitting leagues gives the principal the opportunity to introduce promotions and relegations between nested tournaments (i.e., tournaments that are intertemporally linked), which also enhances incentives.

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Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse6_2003.

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Length: 41
Date of creation: Apr 2003
Date of revision:
Handle: RePEc:bon:bonedp:bgse6_2003
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Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany

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Web page: http://www.bgse.uni-bonn.de

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  4. Ehrenberg, Ronald G & Bognanno, Michael L, 1990. "Do Tournaments Have Incentive Effects?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1307-24, December.
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  9. Jerry R. Green & Nancy L. Stokey, 1982. "A Comparison of Tournaments and Contracts," NBER Working Papers 0840, National Bureau of Economic Research, Inc.
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  11. Sherwin Rosen, 1985. "Prizes and Incentives in Elimination Tournaments," NBER Working Papers 1668, National Bureau of Economic Research, Inc.
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  15. repec:sae:ilrrev:v:43:y:1990:i:3:p:30-51 is not listed on IDEAS
  16. Dye, Ronald A, 1984. "The Trouble with Tournaments," Economic Inquiry, Western Economic Association International, vol. 22(1), pages 147-49, January.
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