Tournaments, Fairness, and Risk

Posted: 20 Jul 2006

See all articles by Steven Y. Wu

Steven Y. Wu

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics; IZA Institute of Labor Economics

Brian E. Roe

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics

Abstract

We estimate willingness to pay (WTP) to operate under two types of contracts - tournaments (Ts) and fixed performance-standard contracts (F). Our results are consistent with the notion that subjects having social preferences for fairness and care about risk. That is, when subjects experience greater inequity under tournaments relative to fixed performance contracts, or experience greater revenue risk under tournaments, the gap between WTP for fixed performance and tournament contracts increases, ceteris paribus. Our results provide an explanation for grower dissatisfaction with tournament compensation schemes independent of possible concerns regarding opportunistic behavior by integrators.

Suggested Citation

Wu, Steven Yu-Ping and Roe, Brian E., Tournaments, Fairness, and Risk. American Journal of Agricultural Economics, Vol. 88, No. 3, pp. 561-573, August 2006. Available at SSRN: https://ssrn.com/abstract=918547 or http://dx.doi.org/10.1111/j.1467-8276.2006.00879.x

Steven Yu-Ping Wu (Contact Author)

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics ( email )

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HOME PAGE: http://www-agecon.ag.ohio-state.edu/people/display.cfm?User_ID=wu412

IZA Institute of Labor Economics

P.O. Box 7240
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Germany

Brian E. Roe

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics ( email )

2120 Fyffe Rd
Columbus, OH 43210-1067
United States
614-688-5777 (Phone)

HOME PAGE: http://https://aede.osu.edu/our-people/brian-e-roe

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