Disappointment aversion in tournaments

Many experiments and field studies indicate that individuals have an asymmetric attitude towards gains versus losses. In this paper, we extend the canonic tournament model by assuming the workers' preferences exhibit disappointment aversion. First, we find the winning prize is first increasing and then decreasing in volatility and the losing prize shows the opposite. Furthermore, when the volatility exceeds a threshold, both the winning and losing prizes are reduced to zero. By contrast, there is no such kink for the risk aversion case. Finally, we find the piece rates always dominate rank-order tournaments when the workers are disappointment averse.     

Sabotage in dynamic tournaments

This paper studies sabotage in a dynamic tournament. Three players compete in two rounds. In the final round, a player who is leading in the race, but not yet beyond the reach of his competitors, is sabotaged more heavily. As a consequence, if all players start off at the same position, they do not work productively or sabotage at all in the first round. Thus sabotage is not only directly destructive, but also depresses incentives to work productively. If players are heterogeneous ex ante, sabotage activities in the first round may be concentrated against an underdog, contrary to findings from static tournaments.     

Strategic delegation in oligopolistic tournaments

This paper considers a two-stage game with two owners and two managers. At the first stage, the owners choose a linear combination of profits and sales as incentives for their managers. At the second stage, the two managers compete in an oligopolistic tournament against each other. The findings substantially differ from the results for Cournot or Bertrand oligopoly: There exist asymmetric equilibria where one owner puts a positive weight on sales and the other a negative one, although the structure of the game is completely symmetric. If the influence of noise vanishes, the owner of the more aggressive firm will even induce sales maximization to his manager in order to preempt his competitor. Received: 22 April 2004, Accepted: 25 December 2005 JEL Classification: L1, M2 I would like to thank the editor Semih Koray, two anonymous referees, Ulf Schiller, Dirk Sliwka, Gunter Steiner, and the participants of the Microeconomics Seminar of the Humboldt University at Berlin for very helpful comments. Financial support by the Deutsche Forschungsgemeinschaft (DFG), grant KR 2077/2-3 and SFB/TR 15 ("Governance and the Efficiency of Economic Systems"), is gratefully acknowledged.     

Relative deprivation in rank-order tournaments

This paper examines the influence of relative deprivation (RD), based on net income, on the strategy choice of workers in tournaments. The results show that for given tournament prizes, workers who experience RD exert more effort than workers who maximize their expected absolute incomes. These findings hold for productive effort as well as for counterproductive effort (sabotage). In addition, the paper discusses various implications that arise when the employer can choose between different compensation schemes in the tournament.     

Information in tournaments under limited liability

The problem of designing tournament contracts under limited liability and alternative performance measures is considered. Under risk neutrality, only the best-performing agent receives an extra premium if the liability constraint becomes binding. Under risk aversion, more than one prize is awarded. In both situations, performance measures can be ranked if their likelihood ratio distribution functions differ by a mean-preserving spread. The latter result is applied to questions of contest design and more general forms of relative performance payment.     

Preemptive behavior in sequential-move tournaments with heterogeneous agents

Rank-order tournaments are usually modeled simultaneously. However, real tournaments are often sequential. We show that agents' strategic behavior in sequential-move tournaments significantly differ from the one in simultaneous-move tournaments: In a sequential-move tournament with heterogeneous agents, the first acting agent may choose a preemptively high effort so that the following agent gives up. The principal is able to prevent preemptive behavior in equilibrium by choosing a sufficiently small spread between winner and loser prize. Received: January 2003, Accepted: November 2004 JEL Classification: J3, M12, M5 We would like to thank two anonymous referees and the editor Kai Konrad for helpful comments. Financial support by the Deutsche Forschungsgemeinschaft (DFG), projects no. KR 2077/2-1 and SFB/TR 15 ("Governance and the Efficiency of Economic Systems"), is gratefully acknowledged.     

Ranking participants in tournaments by means of rating functions

In this paper we bring a novel approach to the theory of tournament rankings. We combine two different theories that are widely used to establish rankings of populations after a given tournament. First, we use the statistical approach of paired comparison analysis to define the performance of a player in a natural way. Then, we determine a ranking (and rating) of the players in the given tournament. Finally, we show, among other properties, that the new ranking method is the unique one satisfying a natural consistency requirement.     

Commitment in R&D tournaments via strategic delegation to overoptimistic managers

This paper shows that it is profitable for a firm to hire an overoptimistic manager to commit to a certain investment strategy in an R&D tournament situation. In the unique symmetric equilibrium, all firms delegate to overoptimistic managers, where the optimal degree of overoptimism depends on the riskiness of the tournament. In these situations a manager's type may serve as a substitute for delegation via contracts. By delegating to overoptimistic managers, firms can escape the rat race nature of R&D tournaments. Copyright © 2010 John Wiley & Sons, Ltd.     

Dissent,sabotage, and leader behaviour in contests: Evidence from European football

This paper provides an empirical investigation of misconducts in contests based on data from European football. We extend previous studies by differentiating between dissents with the referee and misconducts directly aimed at sabotaging the competitor. We find that sabotage is more likely committed by teams with lower ability. Dissent is more likely to be shown by teams lagging behind in score and by away teams. We further find that captains engage more in sabotage during important matches and challenge referees' decisions immediately after sanctions of teammates. Finally, we also observe a deterrence effect of sanctions on all types of misconduct.     

Reduction-consistency in collective choice problems

We consider the problem of choosing a subset of a feasible set over which each agent has a strict preference. We propose an invariance property, reduction-consistency, of choice rules and study its implications. The property is a natural expression for the problems of a general principle of consistency having been studied extensively in resource allocation problems. We show that no scoring rule satisfies reduction-consistency, and base a characterization of the top rule on the property. We also investigate the minimal extension of a rule needed to recover reduction-consistency, and identify the minimal extensions of several rules including the Borda and plurality rules.     

Breaking ties in collective decision-making

Decisions in Economics and Finance - Many classic social preference (multiwinner social choice) correspondences are resolute only when two alternatives and an odd number of individuals are...     

The sale of relational capital through tenure profiles and tournaments

In this paper, a specific form of human capital is analyzed, relational capital, which consists of matches between market parties. Search and information costs make these matches valuable to both parties. Its peculiarity is that the control over such matches is transferred within firms from those who initially control it to anyone who works with it for a period.This characteristic allows someone who approaches the end of his working life to sell his relational capital to junior partners. This sale can explain upward sloping tenure profiles and can result in tournaments if juniors are budget-constrained and perfect contracting is not possible. The need to keep the amount of relational capital constant implies a generational balanced workforce within each firm.     

Simple collective equilibria in stopping games

At each moment in time, an alternative from a finite set is selected by a stochastic process. Players observe the selected alternative and sequentially cast a yes or a no vote. If the set of players casting a yes vote is decisive for the selected alternative, it is accepted and the game ends. Otherwise the next period begins. We refer to this class of problems as stopping games. Collective choice games, quitting games, and coalition formation games are particular examples. When the core of a stopping game is non-empty, a subgame perfect equilibrium in pure stationary strategies is shown to exist. But in general, even subgame perfect equilibria in mixed stationary strategies may not exist. We show that aggregate voting behavior can be summarized by a collective strategy. We insist on pure strategies, allow for simple forms of punishment, and provide a constructive proof to show that so-called two-step simple collective equilibria always exist. This implies the existence of a pure strategy subgame perfect equilibrium. We apply our approach to the case with three alternatives exhibiting a Condorcet cycle and to a model of redistributive politics.     

Recent trends in collective bargaining in Nigeria

During the 1970s Nigerian industrial relations moved away from the voluntarist tradition into much greater formalisation of processes and practices. This article describes the present structure and scope of collective bargaining in Nigeria in the light of this development.     

集体跳槽现象的思索

沸沸扬扬的方正集团助理总裁周险峰率众加盟海信数码事件终于尘埃落定.除了周险峰以外,方正科技产品中心总经理吴京伟、销售平台副总经理吴松林、产品总监以及PC部门的一些基层管理人员和技术人员一起投奔海信.近年来我们的耳边不停地充斥着此类离职事件:陆强华离开创维,带着一群人去独自创业;当年"小霸王"段永平出走创建"步步高",几年以后,一个新崛起的品牌"步步高"迈入中国电器行业排头兵之列.中智上海外企服务公司对5000位去年至少跳过一次槽的外企员工进行的调查中发现,有二成属于集体跳槽.     

A note on CEO compensation, elimination tournaments and bankruptcy risk

We investigate an economy in which firms have different risks to go bankrupt. We observe two things: first, workers in firms with higher bankruptcy risk (bad firms) always work less than workers in good firms. Second, the CEOs of bad firms may nonetheless receive larger wages.JEL Classification: J40, L20, M50Alexander Matros: We are grateful to Karl Wärneryd and an anonymous referee for helpful suggestions. Much of this paper was written while Matros was a Research Fellow at University College London and Friebel was at SITE, Stockholm. We are grateful for their research environmennt. The support of the Economic and Social Research Council (ESRC) is gratefully acknowledged. This work was part of the programme of the ESRC Research Center for Economic Learning and Social Evolution.     

U-type versus J-type tournaments as alternative solutions to the unverifiability problem

This paper discusses the properties of stylized U.S. (“U-type”) and Japanese tournaments (“J-type”), which can both solve the unverifiability problem of labor contracts. Under a zero-profit condition, both tournament types will yield first-best efforts if workers are homogeneous and risk neutral. This result will no longer hold for J-type tournaments if the employer has all the bargaining power. Moreover, if workers are risk averse, or if there is intermediate information, heterogeneity or unfairness, J-type tournaments may dominate U-type tournaments.     

High performance work system and collective OCB: a collective social exchange perspective

Despite an increasing number of studies showing a positive relationship between collective organisational citizenship behaviour (OCB) and unit or organisational performance, relatively little is known about the antecedents of collective OCB. In this study, we developed a collective social exchange approach to collective OCB. We hypothesised that a high performance work system (HPWS) is positively related to collective OCB through collective affective commitment (AC). We obtained data on HPWS, collective AC and collective OCB, all at the middle management group level, from 454 firms in China. Empirical results support the hypotheses.