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

See all articles by Thorsten Knauer

Thorsten Knauer

Ruhr Universität Bochum

Friedrich Sommer

University of Bayreuth

Arnt Wöhrmann

University of Giessen

Date Written: October 22, 2015

Abstract

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

Knauer, Thorsten and Sommer, Friedrich and Wöhrmann, Arnt, Tournament Winner Proportion and Its Effect on Effort: An Investigation of the Underlying Psychological Mechanisms (October 22, 2015). Forthcoming in European Accounting Review. Available at SSRN: https://ssrn.com/abstract=2677701 or http://dx.doi.org/10.2139/ssrn.2677701

Thorsten Knauer

Ruhr Universität Bochum ( email )

Universitätsstraße 150
Bochum, NRW 44801
Germany

HOME PAGE: http://www.wiwi.ruhr-uni-bochum.de/con/

Friedrich Sommer

University of Bayreuth ( email )

Universitatsstr 30
Bayreuth, D-95447
Germany

Arnt Wöhrmann (Contact Author)

University of Giessen ( email )

Managerial Accounting
Licher Str. 62
35394, 35394
Germany

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