The Limits of Meritocracy
80 Pages Posted: 21 Aug 2018 Last revised: 24 Dec 2020
Date Written: January 21, 2019
We show that too much meritocracy, modeled as accuracy of performance ranking in contests, can be a bad thing: in contests with homogeneous agents, it reduces output and is Pareto inefficient. In contests with sufficiently heterogeneous agents, discouragement and complacency effects further reduce the benefits of meritocracy. Perfect meritocracy may be optimal only for intermediate levels of heterogeneity.
Keywords: Contest Theory; Mechanism Design; Auctions
JEL Classification: D82; D44
Suggested Citation: Suggested Citation