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Deterrence in Rank-Order Tournaments

In a tournament, competitors may engage in undesirable activities, or 'cheating', in order to gain an advantage. Examples of such activities include the taking of steroids, plagiarism, and 'creative accounting'. This paper considers the problem of deterrence of these activities and finds that there exist special considerations that are not present in a traditional model of law enforcement. For example, an agent's returns to cheating depend on the cheating decisions of others, and so there may exist multiple equilibria. The problem of multiple equilibria can be reduced when the first-place prize is awarded to the person that performed best without cheating. Moreover, we show that re-awarding prizes reduces the amount of monitoring required to ensure compliance. We also demonstrate that monitoring costs can be further reduced by monitoring the winner of the tournament more than the loser, and by manipulating prizes, including through the introduction of prizes for non-winners.

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File URL: http://www.sfu.ca/econ-research/RePEc/sfu/sfudps/dp07-04.pdf
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Paper provided by Department of Economics, Simon Fraser University in its series Discussion Papers with number dp07-04.

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Length: 30
Date of creation: May 2007
Date of revision:
Handle: RePEc:sfu:sfudps:dp07-04
Contact details of provider: Postal: Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
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Web page: http://www.sfu.ca/economics.html

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  1. Gil S. Epstein & Carsten Hefeker, 2003. "Lobbying contests with alternative instruments," Economics of Governance, Springer, vol. 4(1), pages 81-89, 04.
  2. Bognanno, Michael L, 2001. "Corporate Tournaments," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 290-315, April.
  3. Wolfgang Maennig, 2002. "On the Economics of Doping and Corruption in International Sports," Journal of Sports Economics, , vol. 3(1), pages 61-89, February.
  4. Konrad, Kai A, 2000. "Sabotage in Rent-Seeking Contests," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(1), pages 155-65, April.
  5. Sah, R.K., 1990. "Social Osmosis And Patterns Of Crime: A Dynamic Economic Analysis," Papers 609, Yale - Economic Growth Center.
  6. Christine Harbring & Bernd Irlenbusch & Matthias Kräkel & Reinhard Selten, 2004. "Sabotage in Asymmetric Contests – An Experimental Analysis," Bonn Econ Discussion Papers bgse12_2004, University of Bonn, Germany.
  7. Berentsen, Aleksander, 2002. "The economics of doping," European Journal of Political Economy, Elsevier, vol. 18(1), pages 109-127, March.
  8. Nirvikar Singh & Donald Wittman, 2001. "Contests where there is variation in the marginal productivity of effort," Economic Theory, Springer, vol. 18(3), pages 711-744.
  9. Brian A. Jacob & Steven D. Levitt, 2003. "Rotten Apples: An Investigation Of The Prevalence And Predictors Of Teacher Cheating," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 843-877, August.
  10. Kong-Pin Chen, 2003. "Sabotage in Promotion Tournaments," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 119-140, April.
  11. Eric Rasmusen, 1995. "``Stigma and Self-Fulfilling Expectations of Criminality''," Law and Economics 9506001, EconWPA.
  12. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1993. "Why Is Rent-Seeking So Costly to Growth?," American Economic Review, American Economic Association, vol. 83(2), pages 409-14, May.
  13. Ian Preston, 2003. "Cheating in Contests," Oxford Review of Economic Policy, Oxford University Press, vol. 19(4), pages 612-624, Winter.
  14. Szymanski, Stefan & Valletti, Tommaso M., 2005. "Incentive effects of second prizes," European Journal of Political Economy, Elsevier, vol. 21(2), pages 467-481, June.
  15. 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.
  16. Kenneth Burdett & Ricardo Lagos & Randall Wright, 2003. "Crime, Inequality, and Unemployment," American Economic Review, American Economic Association, vol. 93(5), pages 1764-1777, December.
  17. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  18. Konrad, Kai A., 2005. "Tournaments and Multiple Productive Inputs: The Case of Performance Enhancing Drugs," IZA Discussion Papers 1844, Institute for the Study of Labor (IZA).
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