Dynamically Sabotage-Proof Tournaments

Junichiro Ishida

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: This paper explores the consequences of sabotage for the design of incentive contracts. The possibility of sabotage gives rise to a dynamic concern, similar to the Ratchet effect, which distorts the agents' incentives. We first show that the mere possibility of sabotage may make it impossible to implement the first-best effort, and then offer two distinct incentive schemes, fast track and late selection, to circumvent this problem. The present model offers a mechanism through which these two schemes arise in a unified framework.

Date: 2012-03
New Economics Papers: this item is included in nep-cta, nep-hrm and nep-mic
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0838

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