Optimal effort incentives in dynamic tournaments

Arbeitspapier

This paper analyzes two-stage rank-order tournaments. A principal decides (i) how to spread prize money across the two periods, (ii) how to weigh performance in the two periods when awarding the second-period prize, and (iii) whether to reveal performance after the first period. The information revelation policy depends exclusively on properties of the effort cost function. The principal always puts a positive weight on first-period performance in the second period. The size of the weight and the optimal prizes depend on properties of the observation error distribution; they should be chosen so as to strike a balance between the competitiveness of first- and second-period tournaments. In particular, the principal sets no first-period prize unless the observations in period one are considerably more precise than in period two.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 175

Classification and Topics

• Classification: Wirtschaft ; Institutions: Design, Formation, Operations, and Impact ; Auctions
• Subject: dynamic tournaments ; repeated contests ; information revelation ; effort incentives ; Extensives Spiel ; Dynamisches Spiel ; Leistungsanreiz ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Klein, Arnd Heinrich ; Schmutzler, Armin
• Event: Veröffentlichung
• (who): University of Zurich, Department of Economics
• (where): Zurich
• (when): 2014

Further information

• DOI: doi:10.5167/uzh-99429
• Handle: http://hdl.handle.net/10419/111231
• Last update: 10.03.2025, 11:42 AM CET