Human capital investments in asymmetric corporate tournaments

Jost, Peter-J. and Matthias Kräkel ()

Journal of Economics and Business, 2008, vol. 60, issue 4, pages 312-331

Abstract: We consider a tournament between two workers of different abilities who choose both human capital investment and effort. The employer can influence the workers' behavior by determining the sequence of human capital investments, i.e. the training design. The workers can either invest simultaneously or sequentially with the favorite being the first mover or sequentially with the underdog as first mover. The results show that the outcome of the tournament crucially depends on the employer's choice of training design and on the ability difference between the workers. If the two workers clearly differ in their abilities the employer will prefer simultaneous human capital accumulation. However, if the abilities of the two workers are rather similar the employer optimally chooses sequential human capital accumulation with the underdog being the first mover.

Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:eee:jebusi:v:60:y:2008:i:4:p:312-331

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