Tournament Rewards and Risk Taking

Hans Hvide

Journal of Labor Economics, 2002, vol. 20, issue 4, 877-898

Abstract: This article considers a Lazear-Rosen tournament model where agents can influence both the spread of their output distribution (risk taking) and its mean. The unique equilibrium induces excessive risk taking and a low level of effort. By modifying the tournament to give the highest prize to the agent with the "most moderate" output, a low level of risk taking and high level of effort can be sustained as an equilibrium. The first result can be useful to understand the Relative Performance Evaluation Puzzle of executive compensation, and the second result can be useful to understand puzzling workplace norms promoting mediocrity.

Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (146)

Downloads: (external link)
http://dx.doi.org/10.1086/342041 main text (application/pdf)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Tournament Rewards and Risk Taking (2000)
Working Paper: Tournament Rewards and Risk Taking (1999)
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:ucp:jlabec:v:20:y:2002:i:4:p:877-898

Access Statistics for this article

More articles in Journal of Labor Economics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().