Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/126608
Authors: 
Ewerhart, Christian
Year of Publication: 
2015
Series/Report no.: 
Working Paper Series, University of Zurich, Department of Economics 184 [rev.]
Abstract: 
Optimal rank-order tournaments have traditionally been studied using a first-order approach. The present analysis relies instead on the construction of an "upper envelope" over all incentive compatibility conditions. It turns out that the first-order approach is not innocuous. For example, in contrast to the traditional understanding, tournaments may be dominated by piece rates even if workers are risk-neutral. The paper also offers a strikingly simple characterization of the optimal tournament for quadratic costs and CARA utility, as well as an extension to large tournaments.
Subjects: 
rank-order tournaments
first-order approach
envelope theorem
JEL: 
C62
D86
L23
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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