Hybrid Cardinal Tournaments
Economics Bulletin, Forthcoming
10 Pages Posted: 29 Aug 2010
Date Written: August 26, 2010
This paper proposes an alternative to standard cardinal tournaments. The analysis contrasts “hybrid” cardinal tournaments to standard cardinal tournaments and piece rates. It shows that providing for partial insurance against common uncertainty via a hybrid tournament (in which the weights on absolute and group average performances are not equal) is always better for the principal than providing for full insurance against common uncertainty via a standard tournament (with equal weights), or than providing for no insurance at all via piece rates. Hybrid tournaments increase the principal's profit because the agents exert more effort in equilibrium.
Keywords: Tournaments, Contests, Piece Rates
JEL Classification: D82, D21
Suggested Citation: Suggested Citation