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The Role of Selectivity in Hierarchical Social Systems

  • Jose A. Garcia-Martinez

    ()

    (Departamento de Estudios Económicos y Financieros. Universidad Miguel Hernández)

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    We consider a selection process and a hierarchical institution in a dynamic model as in Harrington [3], where agents are "climbing the pyramid" in a rank-order contest based on the "up or out" policy. Agents are ranked according to the quality of their performances in a particular environment that they face in groups, and a fraction of the highest ranked agents are promoted. The size of this fraction characterizes the selectivity of the process, and we distinguish between local and global selectivity. We study the role of the degree of local and global selectivity in the dynamic process where agents' types differ in their expected performances. Surprisingly, we find that an increase in the selectivity of the process can be detrimental to the agents with the highest expected performances. In fact, it does not matter how small the expected performance of a particular type of agent is. If the degree of selectivity is high enough, that type of agent will survive. However, if the selectivity decreases, the only survivor is the agent with the highest expected performance.

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    File URL: http://webdeptos.uma.es/THEconomica/malagawpseries/Papers/METCwp2010-5.pdf
    File Function: First version, 2010
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    Paper provided by Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center in its series Working Papers with number 2010-05.

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    Date of creation: Jul 2010
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    Handle: RePEc:mal:wpaper:2010-5
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    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 841-64, October.
    2. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-15, September.
    3. Harrington, Joseph Jr., 1999. "The Equilibrium Level of Rigidity in a Hierarchy," Games and Economic Behavior, Elsevier, vol. 28(2), pages 189-202, August.
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