Incentives in Tournaments with Endogenous Prize Selection
31 Pages Posted: 11 Oct 2004
Date Written: October 2004
Abstract
Tournament incentive schemes offer payments dependent on relative performance and thereby are intended to motivate agents to exert productive effort. Unfortunately, however, an agent may also be tempted to destroy the production of his competitors in order to improve the own relative position. In the present study we investigate whether this sabotage problem is mitigated in a repeated interaction between the agents and the principal. As sabotage can hardly be observed in real-world organizations we employ a controlled experiment. Our data provide clear evidence that agents' behavior is not only guided by competition between agents but also by the possibility to punish the principal via sabotage.
Keywords: relative performance evaluation, personnel economics, sabotage, reciprocity, experiments
JEL Classification: D23, J33, J41, L23, C72
Suggested Citation: Suggested Citation
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