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Market-based tournaments: An experimental investigation

Lisa Dickmanns, Marc Gürtler and Oliver Gürtler ()

Labour Economics, 2018, vol. 51, issue C, 294-306

Abstract: This paper examines “market-based tournaments”, in which firms use the tournament outcome to update their expectations about worker ability. A theoretical model offers several implications, which are unique to the market-based tournament and which we test in a laboratory experiment. The experiment supports most of the implications: We find that an increase in the variance of worker ability leads to a higher wage spread and that there is a non-monotonic relationship between this variance and effort. An increase in the marginal product of ability increases effort.

Keywords: Tournament; Promotion; Learning; Experiment (search for similar items in EconPapers)
JEL-codes: C91 D83 J24 J31 M51 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:labeco:v:51:y:2018:i:c:p:294-306