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

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  • Matthias Sutter

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Abstract

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.

Suggested Citation

  • Matthias Sutter, 2004. "Tournaments for the endogenous allocating of prizes within workteams - Theory and experimental evidence," Papers on Strategic Interaction 2004-10, Max Planck Institute of Economics, Strategic Interaction Group.
  • Handle: RePEc:esi:discus:2004-10
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    File URL: ftp://papers.econ.mpg.de/esi/discussionpapers/2004-10.pdf
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    References listed on IDEAS

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    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
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    6. Harbring, Christine & Irlenbusch, Bernd, 2003. "An experimental study on tournament design," Labour Economics, Elsevier, vol. 10(4), pages 443-464, August.
    7. Robert Gibbons, 1998. "Incentives in Organizations," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 115-132, Fall.
    8. Werner Güth & Carsten Schmidt & Matthias Sutter, 2007. "Bargaining outside the lab - a newspaper experiment of a three-person ultimatum game," Economic Journal, Royal Economic Society, vol. 117(518), pages 449-469, March.
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    More about this item

    Keywords

    Tournament; work incentives; teams; allocation of prizes; experiment;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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