Testing Canonical Tournament Theory: On the Impact of Risk, Social Preferences and Utility Structure

Roman Sheremeta and Steven Wu ()

No 6304, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We use experiments to test comparative statics predictions of canonical tournament theory. Both the roles of principal and agent are populated by human subjects, allowing us to test predictions for both incentive responses and optimal tournament design. Consistent with theory, we observed an incentive effect from raising the winner's prize. However, we also observed several empirical puzzles that appeared to contradict theory. Controlling for social preferences did not resolve the puzzles, although social preferences do influence behavior. It turns out that the puzzles can be explained by the canonical model once the textbook assumption of separable agent utility is relaxed.

Keywords: tournaments; experiment; social preferences; contract theory (search for similar items in EconPapers)
JEL-codes: D03 D82 D86 M52 M55 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2012-01
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-hrm and nep-upt
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Citations: View citations in EconPapers (4)

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