Optimal Effort Incentives in Dynamic Tournaments

Armin Schmutzler and Arnd Klein

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: This paper analyzes two-stage rank-order tournaments. A principal decides (i) how to spread prize money across the two periods, (ii) how to weigh performance in the two periods when awarding the second-period prize, and (iii) whether to reveal performance after the rst period. The information revelation policy depends exclusively on properties of the e ort cost function. The principal always puts a positive weight on rst-period performance in the second period. The size of the weight and the optimal prizes depend on properties of the observation error distribution; they should be chosen so as to strike a balance between the competitiveness of rst- and second-period tour- naments. In particular, the principal sets no rst-period prize unless the observations in period one are considerably more precise than in period two

JEL-codes: D02 D21 D86 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-hrm and nep-mic
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https://www.econstor.eu/bitstream/10419/112882/1/VfS_2015_pid_618.pdf (application/pdf)

Related works:
Journal Article: Optimal effort incentives in dynamic tournaments (2017)
Working Paper: Optimal Effort Incentives in Dynamic Tournaments (2014)
Working Paper: Optimal effort incentives in dynamic tournaments (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:112882

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