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Incentives in Tournaments with Endogenous Prize Selection

Author

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  • Harbring, Christine

    () (RWTH Aachen University)

  • Irlenbusch, Bernd

    () (University of Cologne)

Abstract

Tournament incentive schemes offer payments dependent on relative performance and thereby are intended to motivate agents to exert productive effort. Unfortunately, however, an agent may also be tempted to destroy the production of his competitors in order to improve the own relative position. In the present study we investigate whether this sabotage problem is mitigated in a repeated interaction between the agents and the principal. As sabotage can hardly be observed in real-world organizations we employ a controlled experiment. Our data provide clear evidence that agents’ behavior is not only guided by competition between agents but also by the possibility to punish the principal via sabotage.

Suggested Citation

  • Harbring, Christine & Irlenbusch, Bernd, 2004. "Incentives in Tournaments with Endogenous Prize Selection," IZA Discussion Papers 1340, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1340
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Tor Eriksson & Sabrina Teyssier & Marie Claire Villeval, 2006. "Effort Self-Selection and the Efficiency of Tournaments," Post-Print halshs-00142876, HAL.
    2. Jeffrey Carpenter & Peter Hans Matthews & John Schirm, 2010. "Tournaments and Office Politics: Evidence from a Real Effort Experiment," American Economic Review, American Economic Association, vol. 100(1), pages 504-517, March.
    3. Bernd Irlenbusch, 2006. "Experimental perspectives on incentives in organisations," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 14(1), pages 1-24, February.
    4. Gürtler, Oliver & Harbring, Christine, 2007. "Feedback in Tournaments under Commitment Problems: Theory and Experimental Evidence," IZA Discussion Papers 3111, Institute for the Study of Labor (IZA).
    5. Kristoffer W. Eriksen & Ola Kvaløy & Trond E. Olsen, 2011. "Tournaments with Prize‐setting Agents," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(3), pages 729-753, September.
    6. Christine Harbring, 2006. "The effect of communication in incentive systems-an experimental study," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(5), pages 333-353.
    7. Michael Funk & Reiner Eichenberger, 2007. ""It's the Challenger, Stupid!": Elections and the Theory of Rank-Order Tournaments," CREMA Working Paper Series 2007-20, Center for Research in Economics, Management and the Arts (CREMA).
    8. Irlenbusch, Bernd & Ruchala, Gabriele K., 2006. "Relative Rewards within Team-Based Compensation," IZA Discussion Papers 2423, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    relative performance evaluation; reciprocity; personnel economics; sabotage; experiments;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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