Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93802
Authors: 
Imhof, Lorens
Kräkel, Matthias
Year of Publication: 
2013
Series/Report no.: 
SFB/TR 15 Discussion Paper 411
Abstract: 
A standard tournament contract specifies only tournament prizes. If agents' performance is measured on a cardinal scale, the principal can complement the tournament contract by a gap which defines the minimum distance by which the best performing agent must beat the second best to receive the winner prize. We analyze a tournament with two risk averse agents. Under unlimited liability, the principal strictly benefits from a gap by partially insuring the agents and thereby reducing labor costs. If the agents are protected by limited liability, the principal sticks to the standard tournament.
Subjects: 
limited liability
moral hazard
risk aversion
tournament
unlimited liability
JEL: 
C72
D86
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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