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Incentives in Tournaments with Endogenous Prize Selection

  • Harbring, Christine

    ()

    (RWTH Aachen University)

  • Irlenbusch, Bernd

    ()

    (University of Cologne)

Registered author(s):

    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.

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    File URL: http://ftp.iza.org/dp1340.pdf
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    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1340.

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    Length: 31 pages
    Date of creation: Oct 2004
    Date of revision:
    Publication status: published in: Journal of Institutional and Theoretical Economics, 2005, 161 (4), 636-663
    Handle: RePEc:iza:izadps:dp1340
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