Envy and Compassion in Tournaments

27 Pages Posted: 13 Dec 2002

See all articles by Christian Grund

Christian Grund

RWTH Aachen University - School of Economics and Business Administration; IZA Institute of Labor Economics

Dirk Sliwka

University of Cologne - Department of Business Administration and Human Resource Management; IZA Institute of Labor Economics

Date Written: November 2002

Abstract

Many experiments indicate that most individuals are not purely motivated by material self interest, but also care about the well being of others. In this paper we examine tournaments among inequity averse agents, who dislike disadvantageous inequity (envy) and advantageous inequity (compassion). It turns out that inequity averse agents exert higher effort levels than purely self-interested agents for a given prize structure. Contrary to standard tournament theory first-best efforts can not be implemented when prizes are endogenous. Several extensions are studied like the case of spiteful agents, sabotage, asymmetric agents and an application on the choice between vertical and lateral promotions within firms.

Keywords: Tournaments, Promotions, Inequity Aversion

JEL Classification: M51, M52, D23, D63

Suggested Citation

Grund, Christian and Sliwka, Dirk, Envy and Compassion in Tournaments (November 2002). IZA Discussion Paper No. 647. Available at SSRN: https://ssrn.com/abstract=358363

Christian Grund (Contact Author)

RWTH Aachen University - School of Economics and Business Administration ( email )

Aachen
Germany

IZA Institute of Labor Economics

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

Dirk Sliwka

University of Cologne - Department of Business Administration and Human Resource Management ( email )

Koln, 50923
Germany

IZA Institute of Labor Economics

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

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