Incentives in Tournaments with Endogenous Prize Selection

31 Pages Posted: 11 Oct 2004

See all articles by Christine Harbring

Christine Harbring

University of Cologne; IZA Institute of Labor Economics

Bernd Irlenbusch

London School of Economics & Political Science - Department of Management; IZA Institute of Labor Economics

Date Written: October 2004

Abstract

Tournament incentive schemes offer payments dependent on relative performance and thereby are intended to motivate agents to exert productive effort. Unfortunately, however, an agent may also be tempted to destroy the production of his competitors in order to improve the own relative position. In the present study we investigate whether this sabotage problem is mitigated in a repeated interaction between the agents and the principal. As sabotage can hardly be observed in real-world organizations we employ a controlled experiment. Our data provide clear evidence that agents' behavior is not only guided by competition between agents but also by the possibility to punish the principal via sabotage.

Keywords: relative performance evaluation, personnel economics, sabotage, reciprocity, experiments

JEL Classification: D23, J33, J41, L23, C72

Suggested Citation

Harbring, Christine and Irlenbusch, Bernd, Incentives in Tournaments with Endogenous Prize Selection (October 2004). Available at SSRN: https://ssrn.com/abstract=602482 or http://dx.doi.org/10.2139/ssrn.602482

Christine Harbring

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany
+ 49 (0) 221 / 470 - 7955 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Bernd Irlenbusch (Contact Author)

London School of Economics & Political Science - Department of Management ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 (0)20 7955 7840 (Phone)
+44 (0)20 7955 6887 (Fax)

HOME PAGE: http://www.lse.ac.uk/collections/management/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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