Splitting Tournaments

22 Pages Posted: 27 Sep 2010

See all articles by Edwin Leuven

Edwin Leuven

University of Amsterdam - Faculty of Economics and Business (FEB); IZA Institute of Labor Economics

Hessel Oosterbeek

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM); Tinbergen Institute Amsterdam (TIA); Institute for the Study of Labor (IZA)

Bas van der Klaauw

VU University Amsterdam - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Tinbergen Institute

Multiple version iconThere are 2 versions of this paper

Abstract

In this paper we investigate how heterogeneous agents choose among tournaments with different prizes. We show that if the number of agents is sufficiently small, multiple equilibria can arise. Depending on how the prize money is split over the tournaments, these may include, for example, a perfect-sorting equilibrium in which high-ability agents compete in the high-prize tournament, while low-ability agents compete for the low prize. However, there are also equilibria in which agents follow a mixed strategy and there can be reverse sorting, i.e. low-ability agents are in the tournament with the high prize, while high-ability agents are in the low-prize tournament. We show that total effort always decreases compared to a single tournament. However, splitting the tournament may increase the effort of low-ability agents.

Keywords: self-selection, tournament, heterogeneous agents, social planner

JEL Classification: D02, D04

Suggested Citation

Leuven, Edwin and Oosterbeek, Hessel and van der Klaauw, Bas, Splitting Tournaments. IZA Discussion Paper No. 5186, Available at SSRN: https://ssrn.com/abstract=1682707

Edwin Leuven (Contact Author)

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 5241 (Phone)
+31 20 525 4310 (Fax)

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Hessel Oosterbeek

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM) ( email )

Roetersstraat 11
Amsterdam
Netherlands
+31 20 525 4242 (Phone)
+31 20 525 5283 (Fax)

HOME PAGE: http://www.fee.uva.nl/scholar/oosterbeek/

Tinbergen Institute Amsterdam (TIA)

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Institute for the Study of Labor (IZA)

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

Bas Van der Klaauw

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6120 (Phone)
+31 20 444 6005 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
16
Abstract Views
401
PlumX Metrics