Tournament Winner Proportion and Its Effect on Effort: An Investigation of the Underlying Psychological Mechanisms
Forthcoming in European Accounting Review
40 Pages Posted: 23 Oct 2015 Last revised: 9 Apr 2016
Date Written: October 22, 2015
This study investigates the effects of the psychological mechanisms activated by different proportions of tournament winners on effort. Using a real-effort experiment that allows the evolution of social comparison, which is central to our theory, we show that firms can increase employee effort (and performance) by increasing the proportion of winners. Based on a causal model, we generate evidence for our theory that this effect is driven by relative performance concerns and bonus concerns, both of which depend on the proportion of tournament winners. In addition, we find that, over time, the change in effort is more negative the lower the proportion of winners. This effect is driven by the different behaviors of winners and losers in a previous tournament.
Keywords: tournament, proportion of winners, incentives
JEL Classification: M410
Suggested Citation: Suggested Citation