Self-Selection and the Efficiency of Tournaments

19 Pages Posted: 8 Oct 2009

See all articles by Tor Eriksson

Tor Eriksson

Aarhus University - Department of Economics

Sabrina Teyssier

University of Angers - Institute of Economic Theory and Analysis (GATE)

Marie Claire Villeval

Groupe d'Analyse et de Théorie Economique (GATE), CNRS; IZA Institute of Labor Economics; Global Labor Organization (GLO)

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Abstract

The literature has shown that the overall efficiency of exogenously imposed tournaments is reduced by a high variance in performance. This article reports results from an experiment analyzing whether allowing subjects to self-select into different payment schemes is reducing the variability of performance in tournaments. We show that when the subjects choose to enter a tournament instead of a piece-rate payment scheme, the average effort is higher and the between-subject variance is substantially lower than when the same payment scheme is imposed. Mainly based on risk aversion, sorting is efficiency enhancing since it increases the homogeneity of the contestants.

JEL Classification: M52, J33, J31, C81, C91

Suggested Citation

Eriksson, Tor and Teyssier, Sabrina and Villeval, Marie Claire, Self-Selection and the Efficiency of Tournaments. Economic Inquiry, Vol. 47, No. 3, pp. 530-548, July 2009, Available at SSRN: https://ssrn.com/abstract=1484237 or http://dx.doi.org/10.1111/j.1465-7295.2007.00094.x

Tor Eriksson (Contact Author)

Aarhus University - Department of Economics ( email )

Fuglesangs Allé 4
Aarhus, 8210
Denmark
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Sabrina Teyssier

University of Angers - Institute of Economic Theory and Analysis (GATE) ( email )

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Monnaie et Finance at Lyon
69130 Ecully cedex
France

Marie Claire Villeval

Groupe d'Analyse et de Théorie Economique (GATE), CNRS ( email )

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Ecully, 69130
France
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+33 472 86 60 90 (Fax)

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IZA Institute of Labor Economics

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Global Labor Organization (GLO) ( email )

Collogne
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