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Tournaments With Ex Post Heterogeneous Agents

10 Pages Posted: 2 Nov 2007  

Theofanis Tsoulouhas

University of California-Merced, School of Social Sciences, Humanities & Arts, The Ernest & Julio Gallo Management Program

Kosmas Marinakis

National Research University Higher School of Economics

Date Written: October 30, 2007

Abstract

This paper compares relative performance evaluation via tournaments to absolute performance evaluation via piece rates when agents are heterogeneous ex post, to make the point that agent heterogeneity compromises the insurance function of tournaments. In particular, we show that the more heterogeneous agents are the less insurance can be offered through tournaments and the less dominant tournaments are over piece rates. Thus, absolute performance piece rates should be preferred when agents are highly heterogeneous. However, even with heterogeneous agents, tournaments become more desirable when the number of agents or the uncertainty about the common shock increases sufficiently.

Keywords: Piece rates, Tournaments

JEL Classification: D82, D86

Suggested Citation

Tsoulouhas, Theofanis and Marinakis, Kosmas, Tournaments With Ex Post Heterogeneous Agents (October 30, 2007). Available at SSRN: https://ssrn.com/abstract=1026073 or http://dx.doi.org/10.2139/ssrn.1026073

Theofanis Tsoulouhas

University of California-Merced, School of Social Sciences, Humanities & Arts, The Ernest & Julio Gallo Management Program ( email )

Merced, CA 95343
United States
209-228-4640 (Phone)

HOME PAGE: http://tsoulouhas.info

Kosmas Marinakis (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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