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Incentives and selection in promotion contests: Is it possible to kill two birds with one stone?

  • Rudi Stracke

    ()

  • Wolfgang Höchtl

    ()

  • Rudolf Kerschbamer

    ()

  • Uwe Sunde

    ()

This paper investigates whether a designer can improve both the incentive provision and the selection performance of a promotion contest by making the competition more (or less) dynamic. A comparison of static (one-stage) and dynamic (two-stage) contests reveals that this is not the case. A structural change that improves the performance in one dimension leads to a deterioration in the other dimension. This suggests that modifications of the contest structure are an alternative to strategic handicaps. A key advantage of structural handicaps over participant-specific ones is that the implementation of the former does not require prior identification of worker types.

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Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2014-09.

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Length: 41
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:inn:wpaper:2014-09
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  1. Dmitry Ryvkin & Andreas Ortmann, 2008. "The Predictive Power of Three Prominent Tournament Formats," Management Science, INFORMS, vol. 54(3), pages 492-504, March.
  2. Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988. " Compensation and Incentives: Practice vs. Theory," Journal of Finance, American Finance Association, vol. 43(3), pages 593-616, July.
  3. Amegashie, J Atsu, 2000. " Some Results on Rent-Seeking Contests with Shortlisting," Public Choice, Springer, vol. 105(3-4), pages 245-53, December.
  4. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
  5. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  6. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603, March.
  7. Nti, Kofi O, 1999. " Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, vol. 98(3-4), pages 415-30, March.
  8. Theofanis Tsoulouhas & Charles Knoeber & Anup Agrawal, 2007. "Contests to become CEO: incentives, selection and handicaps," Economic Theory, Springer, vol. 30(2), pages 195-221, February.
  9. Jennifer Brown & Dylan B. Minor, 2011. "Selecting the Best? Spillover and Shadows in Elimination Tournaments," NBER Working Papers 17639, National Bureau of Economic Research, Inc.
  10. Bernhardt, Dan, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 315-39, April.
  11. Sherwin Rosen, 1985. "Prizes and Incentives in Elimination Tournaments," NBER Working Papers 1668, National Bureau of Economic Research, Inc.
  12. Prendergast, Canice, 1993. "The Role of Promotion in Inducing Specific Human Capital Acquisition," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 523-34, May.
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