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Self-selection and the Efficiency of Tournaments

  • Tor Eriksson

    ()

    (Department of economics - University of Aarhus)

  • Sabrina Teyssier

    ()

    (Thurgau Institute of Economics - Universität Konstanz)

  • Marie Claire Villeval

    ()

    (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon - Université Jean Monnet - Saint-Etienne - Université Claude Bernard - Lyon I)

The literature has shown that the overall efficiency of exogenously imposed tournaments is reduced by a high variance in performance. This paper reports results from an experiment analyzing whether allowing subjects to self-select into different payment schemes is reducing the variability of performance in tournaments. We show that when the subjects choose to enter a tournament instead of a piece-rate payment scheme, the average effort is higher and the between-subject variance is substantially lower than when the same payment scheme is imposed. Mainly based on risk aversion, sorting is efficiency-enhancing since it increases the homogeneity of the contestants.

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Paper provided by HAL in its series Post-Print with number halshs-00451600.

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Date of creation: 2009
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Publication status: Published, Economic Inquiry, 2009, 47, 3, pp. 530-548
Handle: RePEc:hal:journl:halshs-00451600
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00451600
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