Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/213438 
Year of Publication: 
2020
Series/Report no.: 
University of Tübingen Working Papers in Business and Economics No. 128
Publisher: 
University of Tübingen, Faculty of Economics and Social Sciences, Tübingen
Abstract: 
We analyze product market competition between firm owners where the risk-neutral workers decide on their efforts and, thereby, on the output levels. Various worker compensation schemes are compared: a piece-rate compensation scheme as a benchmark when workers' output performance is verifiable, and a contest-based as well as a tournament-based compensation scheme when it is only verifiable who the best performing worker is. According to optimal designs, all the considered compensation contracts lead to an equal market outcome. Therefore, it depends decisively on the relative costs of organizing a monitoring device, a contest, or a tournament whether the one or the other compensation scheme should be implemented.
Subjects: 
worker compensation schemes
piece rates
contests
tournaments
product market competition
JEL: 
C72
L22
M52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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