Tournaments, Fairness, and Risk

Steven Wu () and Brian Roe

American Journal of Agricultural Economics, 2006, vol. 88, issue 3, 561-573

Abstract: We estimate willingness to pay (WTP) to operate under two types of contracts—tournaments (Ts) and fixed performance-standard contracts (F). Our results are consistent with the notion that subjects having social preferences for fairness and care about risk. That is, when subjects experience greater inequity under tournaments relative to fixed performance contracts, or experience greater revenue risk under tournaments, the gap between WTP for fixed performance and tournament contracts increases, ceteris paribus. Our results provide an explanation for grower dissatisfaction with tournament compensation schemes independent of possible concerns regarding opportunistic behavior by integrators. Copyright 2006, Oxford University Press.

Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:88:y:2006:i:3:p:561-573

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American Journal of Agricultural Economics is currently edited by Madhu Khanna, Brian E. Roe, James Vercammen and JunJie Wu

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