Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/46035
Authors: 
Leuven, Edwin
Oosterbeek, Hessel
van der Klaauw, Bas
Year of Publication: 
2010
Series/Report no.: 
Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5186
Abstract: 
In this paper we investigate how heterogeneous agents choose among tournaments with different prizes. We show that if the number of agents is sufficiently small, multiple equilibria can arise. Depending on how the prize money is split over the tournaments, these may include, for example, a perfect-sorting equilibrium in which high-ability agents compete in the high-prize tournament, while low-ability agents compete for the low prize. However, there are also equilibria in which agents follow a mixed strategy and there can be reverse sorting, i.e. low-ability agents are in the tournament with the high prize, while high-ability agents are in the low-prize tournament. We show that total effort always decreases compared to a single tournament. However, splitting the tournament may increase the effort of low-ability agents.
Subjects: 
self-selection
tournament
heterogeneous agents
social planner
JEL: 
D02
D04
Document Type: 
Working Paper

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