Incentives in Tournaments with Endogenous Prize Selection

Christine Harbring () and Bernd Irlenbusch ()
Additional contact information
Christine Harbring: RWTH Aachen University
Bernd Irlenbusch: University of Cologne

No 1340, IZA Discussion Papers from Institute of Labor Economics (IZA)

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; reciprocity; personnel economics; sabotage; experiments (search for similar items in EconPapers)
JEL-codes: C72 D23 J33 J41 L23 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2004-10
New Economics Papers: this item is included in nep-exp
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Citations: View citations in EconPapers (10)

Published - published in: Journal of Institutional and Theoretical Economics, 2005, 161 (4), 636-663

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