Envy and Compassion in Tournaments

Christian Grund and Dirk Sliwka

No 647, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Many experiments indicate that most individuals are not purely motivated by material self interest, but also care about the well being of others. In this paper we examine tournaments among inequity averse agents, who dislike disadvantageous inequity (envy) and advantageous inequity (compassion). It turns out that inequity averse agents exert higher effort levels than purely self-interested agents for a given prize structure. Contrary to standard tournament theory first-best efforts can not be implemented when prizes are endogenous. Several extensions are studied like the case of spiteful agents, sabotage, asymmetric agents and an application on the choice between vertical and lateral promotions within firms.

Keywords: tournaments; inequity aversion; promotions (search for similar items in EconPapers)
JEL-codes: D23 D63 M51 M52 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2002-11
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (4)

Published - revised version published in: Journal of Economics and Management Strategy, 2005, 14 (1), 187-207

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Related works:
Journal Article: Envy and Compassion in Tournaments (2005)
Working Paper: Envy and Compassion in Tournaments (2002)
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