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Splitting Tournaments

Author

Listed:
  • Leuven, Edwin

    () (University of Oslo)

  • Oosterbeek, Hessel

    () (University of Amsterdam)

  • van der Klaauw, Bas

    () (Vrije Universiteit Amsterdam)

Abstract

In this paper we investigate how heterogeneous agents choose among tournaments with different prizes. We show that if the number of agents is sufficiently small, multiple equilibria can arise. Depending on how the prize money is split over the tournaments, these may include, for example, a perfect-sorting equilibrium in which high-ability agents compete in the high-prize tournament, while low-ability agents compete for the low prize. However, there are also equilibria in which agents follow a mixed strategy and there can be reverse sorting, i.e. low-ability agents are in the tournament with the high prize, while high-ability agents are in the low-prize tournament. We show that total effort always decreases compared to a single tournament. However, splitting the tournament may increase the effort of low-ability agents.

Suggested Citation

  • Leuven, Edwin & Oosterbeek, Hessel & van der Klaauw, Bas, 2010. "Splitting Tournaments," IZA Discussion Papers 5186, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5186
    as

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    References listed on IDEAS

    as
    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Edwin Leuven & Hessel Oosterbeek & Joep Sonnemans & Bas van der Klaauw, 2011. "Incentives versus Sorting in Tournaments: Evidence from a Field Experiment," Journal of Labor Economics, University of Chicago Press, vol. 29(3), pages 637-658.
    3. Moldovanu, Benny & Sela, Aner, 2006. "Contest architecture," Journal of Economic Theory, Elsevier, vol. 126(1), pages 70-96, January.
    4. Green, Jerry R & Stokey, Nancy L, 1983. "A Comparison of Tournaments and Contracts," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 349-364, June.
    5. Ghazala Azmat & Marc Möller, 2009. "Competition among contests," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 743-768.
    6. Ehrenberg, Ronald G & Bognanno, Michael L, 1990. "Do Tournaments Have Incentive Effects?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1307-1324, December.
    7. Harbring, Christine & Irlenbusch, Bernd, 2003. "An experimental study on tournament design," Labour Economics, Elsevier, vol. 10(4), pages 443-464, August.
    8. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987. "Tournaments and Piece Rates: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 1-33, February.
    9. Clark, Derek J & Riis, Christian, 1998. "Competition over More Than One Prize," American Economic Review, American Economic Association, vol. 88(1), pages 276-289, March.
    10. Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
    11. Glazer, Amihai & Hassin, Refael, 1988. "Optimal Contests," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 133-143, January.
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    More about this item

    Keywords

    self-selection; tournament; heterogeneous agents; social planner;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation

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