Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/20258
Authors: 
Epstein, Gil S.
Nitzan, Shmuel
Year of Publication: 
2004
Series/Report no.: 
IZA Discussion paper series 1023
Abstract: 
By the well established tournament literature, incomplete information regarding the employees? productivity is essential for the rationalization of (efficiency-enhancing) tournaments. In this paper we propose an alternative rationalization of tournaments focusing on a fully informed principal whose objective is to maximize a weighted average of the profitability (productivity) of his team and of the promotion-seeking efforts of his employees. Our first main result clarifies the conditions under which the principal has an incentive to create a tournament that determines the promoted employee. We then examine the effect of the employees' productivity on their probability of promotion and on the extent of the resources wasted in the tournament. In particular, we specify the conditions that ensure that the most productive employee (the natural candidate for promotion) is less likely to be promoted and the conditions under which higher employee's productivity results in increased wasted promotion-seeking efforts.
Subjects: 
tournaments
promotion
JEL: 
J2
D71
D2
Document Type: 
Working Paper

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