Dynamically Sabotage-Proof Tournaments
This paper examines a two-period tournament where agents may possibly engage in destructive sabotage activities. Under plausible circumstances, sabotage proves to be an effective tool for low-ability agents, especially when they are faced with high-ability agents. The possibility of sabotage then gives rise to a dynamic concern, similar to the Ratchet effect, because an agent runs a risk of becoming the target of sabotage by signaling his high ability in early stages. In this dynamic setting, we first establish an impossibility result where the mere possibility of sabotage makes it impossible to implement the first-best effort due to this dynamic concern. Given this result, we then offer two distinct incentive schemes, fast track and late selection, to circumvent this problem. The fast-track scheme is likely to prevail when the production process values diversity in inputs (submodular technologies) while the late-selection scheme is to prevail when it values homogeneity (supermodular technologies). The present model thus offers a mechanism through which both fast track and late selection arise in a unified framework, which can explain the difference in managerial practices between the US and Japan.
|Date of creation:||May 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.osipp.osaka-u.ac.jp/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pierre-Andre Chiappori & Bernard Salanie & Julie Valentin, 1999. "Early Starters versus Late Beginners," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 731-760, August.
- Ishida, Junichiro, 2004. "Signaling and strategically delayed promotion," Labour Economics, Elsevier, vol. 11(6), pages 687-700, December.
- repec:cup:cbooks:9780521642408 is not listed on IDEAS
- Michael Waldman, 2003. "Ex Ante versus Ex Post Optimal Promotion Rules: The Case of Internal Promotion," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 27-41, January.
- Kong-Pin Chen, 2004.
"External Recruitment as an incentive Device,"
Econometric Society 2004 North American Summer Meetings
54, Econometric Society.
- Chan, William, 1996. "External Recruitment versus Internal Promotion," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 555-70, October.
- Meyer, Margaret A, 1992.
"Biased Contests and Moral Hazard: Implications for Career Profiles,"
CEPR Discussion Papers
637, C.E.P.R. Discussion Papers.
- Margaret A. MEYER, 1992. "Biased Contests and Moral Hazard: Implications for Career Profiles," Annales d'Economie et de Statistique, ENSAE, issue 25-26, pages 165-187.
- Michael Waldman, 1984.
"Job Assignments, Signalling, and Efficiency,"
RAND Journal of Economics,
The RAND Corporation, vol. 15(2), pages 255-267, Summer.
- Edward P. Lazear & Sherwin Rosen, 1979.
"Rank-Order Tournaments as Optimum Labor Contracts,"
NBER Working Papers
0401, National Bureau of Economic Research, Inc.
- Naoto Osawa & Kazushige Kamiyama & Koji Nakamura & Tomohiro Noguchi & Eiji Maeda, 2002. "An Examination of Structural Changes in Employment and Wages in Japan," Bank of Japan Research Papers 2002-08-02, Bank of Japan.
- Hodaka Morita, 2002.
"Multiskilling, Delegation, and Continuous Process Improvement: A Comparative Analysis of U.S.-Japanese Work Organizations,"
Labor and Demography
- Hodaka Morita, 2005. "Multi-skilling, Delegation and Continuous Process Improvement: A Comparative Analysis of US-Japanese Work Organizations," Economica, London School of Economics and Political Science, vol. 72(285), pages 69-93, 02.
- Bernhardt, Dan, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 315-39, April.
- Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
- Hideo Owan, 2004. "Promotion, Turnover, Earnings, and Firm-Sponsored Training," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 955-978, October.
- Robert Gibbons & Michael Waldman, 1999. "A Theory Of Wage And Promotion Dynamics Inside Firms," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1321-1358, November.
- Kong-Pin Chen, 2003. "Sabotage in Promotion Tournaments," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 119-140, April.
- Bentley MacLeod & James M. Malcomson, 1985.
"Reputation and Hierarchy in Dynamic Models of Employment,"
628, Queen's University, Department of Economics.
- MacLeod, W Bentley & Malcomson, James M, 1988. "Reputation and Hierarchy in Dynamic Models of Employment," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 832-54, August.
- Ishiguro, Shingo, 2004. "Collusion and discrimination in organizations," Journal of Economic Theory, Elsevier, vol. 116(2), pages 357-369, June.
- Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
- Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
- Gibbons, Robert & Waldman, Michael, 1999. "Careers in organizations: Theory and evidence," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 36, pages 2373-2437 Elsevier.
- Junichiro Ishida, 2006. "Optimal Promotion Policies with the Looking-Glass Effect," Journal of Labor Economics, University of Chicago Press, vol. 24(4), pages 857-878, October.
When requesting a correction, please mention this item's handle: RePEc:osp:wpaper:06e001. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Akiko Murashita)
If references are entirely missing, you can add them using this form.