Tournaments with reserve performance

Mikhail Drugov, Dmitry Ryvkin and Jun Zhang ()
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Jun Zhang: Economics Discipline Group, School of Business, University of Technology Sydney

Working Papers from Department of Economics, Florida State University

Abstract: We study tournaments where winning a rank-dependent prize requires passing a reserve---a minimum performance standard. Agents' performance is determined by effort and noise. For log-concave noise distributions the optimal reserve is at the modal performance, and the optimal prize scheme is winner-take-all. In contrast, for log-convex noise distributions the optimal reserve is at the lower bound of the distribution of performance, which is passed with probability one in equilibrium, and it is optimal to award equal prizes to all qualifying agents. These pay schemes are optimal in a general class of symmetric monotone contracts that may depend on cardinal performance.

Keywords: tournament; reserve performance; prize sharing (search for similar items in EconPapers)
JEL-codes: C72 D72 D82 (search for similar items in EconPapers)
Pages: 38
Date: 2022-03
New Economics Papers: this item is included in nep-cta, nep-hrm, nep-mic and nep-spo
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Citations: View citations in EconPapers (1)

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Working Paper: Tournaments with Reserve Performance (2022)
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