The Perks of Being in the Smaller Team: Incentives in Overlapping Contests

Christoph March and Marco Sahm

VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy from Verein für Socialpolitik / German Economic Association

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 larger units are disadvantaged in the grand (organization-wide) contest for two reasons: First, the incentive to freeride is larger in inter-divisional contests. Second, competition in the intra-divisional contest is fiercer. Both effects lower the marginal utility of effort provision. We test our 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
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: The Perks of Being in the Smaller Team: Incentives in Overlapping Contests (2019)
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:vfsc19:203509

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