Positive Self-Image in Tournaments

FEUNL Working Paper Series No. 510

29 Pages Posted: 14 Jul 2007

Date Written: February 27, 2007

Abstract

This paper analyzes the implications of worker overestimation of productivity for firms in which incentives take the form of tournaments. Each worker overestimates his productivity but is aware of the bias in his opponent's self-assessment. The manager of the firm, on the other hand, correctly assesses workers' productivities and self-beliefs when setting tournament prizes. The paper shows that, under a variety of circumstances, firms make higher profits when workers have positive self-image than if workers do not. By contrast, workers' welfare declines due to their own misguided choices.

Keywords: Self-Image, Tournaments, Behavioral Economics

JEL Classification: A12; J41

Suggested Citation

Santos-Pinto, Luis P., Positive Self-Image in Tournaments (February 27, 2007). FEUNL Working Paper Series No. 510, Available at SSRN: https://ssrn.com/abstract=999636 or http://dx.doi.org/10.2139/ssrn.999636

Luis P. Santos-Pinto (Contact Author)

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland