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Optimal effort incentives in dynamic tournaments

Arnd Heinrich Klein and Armin Schmutzler ()

Games and Economic Behavior, 2017, vol. 103, issue C, 199-224

Abstract: This paper analyzes two-stage rank-order tournaments. To influence efforts in the two periods, a principal can use the intertemporal prize structure and the weight of first-period performance in the second-period prize. These two instruments implement different sets of effort vectors. We characterize the optimal combination of prizes and weights as a function of parameters. For large parameter regions, the principal should only give a second-period prize, but use positive first-period performance weights. This holds no matter whether efforts in different periods are perfect or imperfect substitutes and whether the principal gives feedback on performance or not. We also generalize existing results on whether giving feedback is beneficial for the principal.

Keywords: Dynamic tournaments; Repeated contests; Feedback; Effort incentives (search for similar items in EconPapers)
JEL-codes: D02 D44 (search for similar items in EconPapers)
Date: 2017
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Related works:
Working Paper: Optimal Effort Incentives in Dynamic Tournaments (2015) Downloads
Working Paper: Optimal Effort Incentives in Dynamic Tournaments (2014) Downloads
Working Paper: Optimal effort incentives in dynamic tournaments (2014) Downloads
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