Tournaments and piece rates revisited: a theoretical and experimental study of output-dependent prize tournaments

Güth, Werner; Levı́nský, René; Pull, Kerstin; Weisel, Ori

doi:10.1007/s10058-015-0184-7

“…Although we only used tournaments in our experiment, we believe that our results are also applicable to other relative performance incentive settings (Cason et al, 2010(Cason et al, , 2019Agranov and Tergiman, 2013;Güth et al, 2016). The tournament winner is determined by calculating the…”

Section: Discussionmentioning

confidence: 99%

Adding tournament to tournament: Combining between-team and within-team incentives

Majerczyk

¹

,

Sheremeta

²

,

Yu

³

2019

Journal of Economic Behavior & Organization

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We examine theoretically and experimentally how combining between-team and within-team incentives affects behavior in team tournaments. Theory predicts that free-riding will occur when there are only between-team incentives, and offering within-team incentives may solve this problem. However, if individuals collude, then within-team incentives may not be as effective at reducing free-riding. Consistent with the theoretical predictions, the results of our experiment indicate that although between-team incentives are effective at increasing individual effort, there is substantial free-riding and declining effort over time. Importantly, a combination of between-team and within-team incentives is effective not only at generating effort but also at sustaining effort over time, mitigating free-riding problem, increasing cooperation and decreasing collusion within teams.JEL Classifications: C70, D72, H41

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“…Although we only used tournaments in our experiment, we believe that our results are also applicable to other relative performance incentive settings (Cason et al, 2010(Cason et al, , 2019Agranov and Tergiman, 2013;Güth et al, 2016). Group Bonus = 180 points; Individual Bonus = 180 points.…”

Section: Discussionmentioning

confidence: 95%

Adding Tournament to Tournament: Combining Between-Team and Within-Team Incentives

Majerczyk

¹

,

Sheremeta

²

,

Yu

³

2018

View full text Add to dashboard Cite

We examine theoretically and experimentally how combining between-team and within-team incentives affects behavior in team tournaments. Theory predicts that free-riding will occur when there are only between-team incentives, and offering within-team incentives may solve this problem. However, if individuals collude, then within-team incentives may not be as effective at reducing free-riding. Consistent with the theoretical predictions, the results of our experiment indicate that although between-team incentives are effective at increasing individual effort, there is substantial free-riding and declining effort over time. Importantly, a combination of between-team and within-team incentives is effective not only at generating effort but also at sustaining effort over time, mitigating free-riding problem, increasing cooperation and decreasing collusion within teams.

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“…An active study of such problems was initiated in 1980s: [23,14,26,24]. We also mention several recent papers with an emphasis on experimental and empirical studies: [6,15,29], where the reader can find a lot of additional references. The prevailing concept is the rank-order allocation of prizes (rank-order tournaments).…”

Section: Introductionmentioning

confidence: 99%

Asymptotic efficiency of the proportional compensation scheme for a large number of producers

Rokhlin

¹

,

Усов

²

2018

YUGOSLAV J OPERATION

0

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We consider a manager, who allocates some fixed total payment amount between N rational agents in order to maximize the aggregate production. The profit of i-th agent is the difference between the compensation (reward) obtained from the manager and the production cost. We compare (i) the normative compensation scheme, where the manager enforces the agents to follow an optimal cooperative strategy; (ii) the linear piece rates compensation scheme, where the manager announces an optimal reward per unit good; (iii) the proportional compensation scheme, where agent's reward is proportional to his contribution to the total output. Denoting the correspondent total production levels by s * ,ŝ and s respectively, where the last one is related to the unique Nash equilibrium, we examine the limits of the prices of anarchy A N = s * /s, A ′ N =ŝ/s as N → ∞. These limits are calculated for the cases of identical convex costs with power asymptotics at the origin, and for power costs, corresponding to the Coob-Douglas and generalized CES production functions with decreasing returns to scale. Our results show that asymptotically no performance is lost in terms of A ′ N , and in terms of A N the loss does not exceed 31%.2010 Mathematics Subject Classification. 91B32, 91B40, 91B38.

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Tournaments and piece rates revisited: a theoretical and experimental study of output-dependent prize tournaments

Cited by 6 publications

References 34 publications

Adding tournament to tournament: Combining between-team and within-team incentives

Adding tournament to tournament: Combining between-team and within-team incentives

Adding Tournament to Tournament: Combining Between-Team and Within-Team Incentives

Asymptotic efficiency of the proportional compensation scheme for a large number of producers

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