Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111231
Authors: 
Klein, Arnd Heinrich
Schmutzler, Armin
Year of Publication: 
2014
Series/Report no.: 
Working Paper Series, University of Zurich, Department of Economics 175
Abstract: 
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.
Subjects: 
dynamic tournaments
repeated contests
information revelation
effort incentives
JEL: 
D02
D44
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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