Incentives vs. Selection in Promotion Tournaments: Can a Designer Kill Two Birds with One Stone?

Wolfgang Höchtl (), Rudolf Kerschbamer, Rudi Stracke and Uwe Sunde
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Wolfgang Höchtl: University of Innsbruck

No 5755, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper studies the performance of promotion tournaments with heterogeneous participants in two dimensions: incentive provision and selection. Our theoretical analysis reveals a trade-off for the tournament designer between the two goals: While total effort is maximized if less heterogeneous participants compete against each other early in the tournament, letting more heterogeneous participants compete early increases the accuracy in selection. Experimental evidence supports our theoretical findings, indicating that the optimal design of promotion tournaments crucially depends on the objectives of the tournament designer. These findings have important implications for the optimal design of promotion tournaments in organizations.

Keywords: promotion tournaments; heterogeneity; incentive provision; selection (search for similar items in EconPapers)
JEL-codes: J33 M52 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2011-05
New Economics Papers: this item is included in nep-cta, nep-exp and nep-hrm
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Citations: View citations in EconPapers (21)

Published - revised version published in: Managerial and Decision Economics, 2015, 36(5), 275–285

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