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Splitting Tournaments

  • Leuven, Edwin

    ()

    (University of Oslo)

  • Oosterbeek, Hessel

    ()

    (University of Amsterdam)

  • van der Klaauw, Bas

    ()

    (VU University Amsterdam)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5186.

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Length: 22 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:iza:izadps:dp5186
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  1. Green, Jerry & Stokey, Nancy, 1983. "A Comparison of Tournaments and Contracts," Scholarly Articles 3203644, Harvard University Department of Economics.
  2. Leuven, Edwin & Oosterbeek, Hessel & Sonnemans, Joep & van der Klaauw, Bas, 2008. "Incentives versus Sorting in Tournaments: Evidence from a Field Experiment," IZA Discussion Papers 3326, Institute for the Study of Labor (IZA).
  3. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1985. "Tournaments and Piece Rates: An Experimental Study," Working Papers 85-21, C.V. Starr Center for Applied Economics, New York University.
  4. Clark, Derek J & Riis, Christian, 1998. "Competition over More Than One Prize," American Economic Review, American Economic Association, vol. 88(1), pages 276-89, March.
  5. Harbring, Christine & Irlenbusch, Bernd, 2003. "An experimental study on tournament design," Labour Economics, Elsevier, vol. 10(4), pages 443-464, August.
  6. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  7. Moldovanu, Benny & Sela, Aner, 2006. "Contest architecture," Journal of Economic Theory, Elsevier, vol. 126(1), pages 70-96, January.
  8. Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
  9. Ghazala Azmat & Marc Möller, 2008. "Competition amongst contests," Economics Working Papers 1072, Department of Economics and Business, Universitat Pompeu Fabra.
  10. Glazer, Amihai & Hassin, Refael, 1988. "Optimal Contests," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 133-43, January.
  11. Ronald G. Ehrenberg & Michael L. Bognanno, 1988. "Do Tournaments Have Incentive Effects?," NBER Working Papers 2638, National Bureau of Economic Research, Inc.
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