Tournaments with gaps

Lorens Imhof and Matthias Kräkel

Economics Letters, 2014, vol. 122, issue 2, 211-214

Abstract: A standard tournament contract specifies only tournament prizes. If agents’ performance is measured on a cardinal scale, the principal can complement the tournament contract by a gap which defines the minimum distance by which the best performing agent must beat the second best to receive the winner prize. We analyze a tournament with two risk averse agents. Under unlimited liability, the principal strictly benefits from a gap by partially insuring the agents and thereby reducing labor costs. If the agents are protected by limited liability, the principal sticks to the standard tournament.

Keywords: Contest; Contract; Moral hazard; Risk aversion; Unlimited liability (search for similar items in EconPapers)
JEL-codes: C72 D86 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176513005120
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Tournaments with Gaps (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:122:y:2014:i:2:p:211-214

DOI: 10.1016/j.econlet.2013.11.018

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().