The perks of being in the smaller team: Incentives in overlapping contests

Christoph March and Marco Sahm

No 155, BERG Working Paper Series from Bamberg University, Bamberg Economic Research Group

Abstract: We investigate overlapping contests in multi-divisional organizations in which an individual's effort simultaneously determines the outcome of several contests on different hierarchical levels. We show that individuals in smaller units are advantaged in the grand (organization-wide) contest for two reasons: First, the incentive to free-ride is smaller in inter-divisional contests. Second, competition in the intradivisional contest is less fierce. Both effects induce a higher marginal utility of effort provision. We test the model in a laboratory experiment and confirm its main predictions. Our results have important consequences for the provision of incentives in organizations and the design of sports competitions.

Keywords: Contest; Rent-seeking; Hierarchy; Teams; Experiment (search for similar items in EconPapers)
JEL-codes: C72 C92 D72 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-exp, nep-hrm, nep-mic and nep-spo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: The Perks of Being in the Smaller Team: Incentives in Overlapping Contests (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bamber:155

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