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Self-selection and the Efficiency of Tournaments

Author

Listed:
  • Tor Eriksson

    (Department of economics)

  • Sabrina Teyssier

    (Thurgau Institute of Economics - University of Konstanz)

  • Marie Claire Villeval

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

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.

Suggested Citation

  • Tor Eriksson & Sabrina Teyssier & Marie Claire Villeval, 2009. "Self-selection and the Efficiency of Tournaments," Post-Print halshs-00451600, HAL.
    • Handle: RePEc:hal:journl:halshs-00451600
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00451600
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    References listed on IDEAS

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    More about this item

    Keywords

    Tournament; Performance Pay; Incentives; Sorting; Selection; Experiment;
    All these keywords.

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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