Principal-agent and peer relationships in tournaments

Gerald Eisenkopf and Sabrina Teyssier ()
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Gerald Eisenkopf: Thurgau Institute of Economics - University of Konstanz
Sabrina Teyssier: ALISS - Alimentation et sciences sociales - INRA - Institut National de la Recherche Agronomique, INRA - Institut National de la Recherche Agronomique

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Abstract: Effort provision in tournaments may depend on both social preferences towards the competitor and social preferences towards the principal who designed the tournament. In a laboratory experiment, we analyze agents' behavior in different tournament settings that vary the distribution of the prize between agents. The principal chooses between a low and a high guaranteed payment. Standard economic theory predicts the same effort provision in all situations. Instead, our results show that both the generosity of the principal and the strict separation between winner and loser increase the effort level in tournaments. Moreover, agents focus their preferences either on the principal or on the agent.

Date: 2016-03
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Published in Managerial and Decision Economics, 2016, 37 (2), pp.127-139. ⟨10.1002/mde.2698⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02104241

DOI: 10.1002/mde.2698

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