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Tournaments for the endogenous allocating of prizes within workteams - Theory and experimental evidence

  • Matthias Sutter

    ()

We present a model where compensation within a workteam is determined endogenously by the use of a rank-order tournament. Team members compete in their efforts for the right to propose the distribution of a prize within the team. The implementation of a proposal requires the approval of other team members. Failure to reach an agreement is costly and the role of proposer rotates in the order of members' efforts. We show in an experiment that tournaments elicit higher efforts than random determination of the proposer role. Proposers get a significantly larger share of the prize than non-proposers.

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Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2004-10.

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Length: 37 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:esi:discus:2004-10
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  1. Charness, Gary B & Rabin, Matthew, 2001. "Understanding Social Preferences With Simple Tests," University of California at Santa Barbara, Economics Working Paper Series qt0dc3k4m5, Department of Economics, UC Santa Barbara.
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  8. Harbring, Christine & Irlenbusch, Bernd, 2003. "An experimental study on tournament design," Labour Economics, Elsevier, vol. 10(4), pages 443-464, August.
  9. Carsten Schmidt & Matthias Sutter & Werner Guth, 2002. "Bargaining outside the lab - a newspaper experiment of a three person-ultimatum game," Artefactual Field Experiments 00050, The Field Experiments Website.
  10. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
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  12. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
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