An envelope approach to tournament design

Christian Ewerhart

Journal of Mathematical Economics, 2016, vol. 63, issue C, 1-9

Abstract: Optimal rank-order tournaments have traditionally been studied using a first-order approach. The present analysis relies instead on the construction of an “upper envelope” over all incentive compatibility conditions. It turns out that the first-order approach is not innocuous. For example, in contrast to the traditional understanding, tournaments may be dominated by piece rates even if workers are risk-neutral. The paper also offers a strikingly simple characterization of the optimal tournament for quadratic costs and CARA utility, as well as an extension to large tournaments.

Keywords: Rank-order tournaments; First-order approach; Envelope theorem (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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Working Paper: An envelope approach to tournament design (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:63:y:2016:i:c:p:1-9

DOI: 10.1016/j.jmateco.2015.11.004

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