Precision in U-Type and J-Type Tournaments

Anja Schöttner

Schmalenbach Business Review (sbr), 2005, vol. 57, issue 2, 167-192

Abstract: In this paper I contrast the impact of precision, i.e., the level of accuracy with which workers’ performance is assessed, on wage costs in U- and J-type tournaments. In U-type tournaments prizes are fixed. In J-type tournaments only an overall wage sum is specified. The principal can increase precision by including more signals in performance measurement. Doing so leads to stronger incentives in U-type tournaments, but not in J-type tournaments. The principal strictly prefers a U-type tournament if workers receive a rent under limited liability and the costs of increasing precision are low. However, if workers are inequity-averse and have unlimited liability, the J-type tournament leads to lower wage costs.

Keywords: Inequity Aversion; Precision; Tournaments. (search for similar items in EconPapers)
JEL-codes: D23 D63 M51 M52 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sbr:abstra:v:57:y:2005:i:2:p:167-192

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