Workaholics and Drop Outs in Optimal Organizations
CentER Discussion Paper No. 2003-43
Posted: 8 Jun 2004
Date Written: 2003
This paper reports the results of experiments designed to test the theory of the optimal composition of prizes in contests. We find that while in the aggregate results mask an unexpected compositional effect on the individual level. While theory predicts that subject efforts are continuous and increasing functions of ability, the actual efforts of our laboratory subjects bifurcate. Low ability workers drop out and exert little or nor effort while high ability subjects try too hard. This discontinuity, which is masked by aggregation, has significant consequences for behavior in organizations.
Keywords: Contests, all-pay auctions, experiments
JEL Classification: C92, D44, J31, D72, D82
Suggested Citation: Suggested Citation