1) Optimal Effort Incentives in Dynamic Tournaments (with Armin Schmutzler). Published in John Nash Memorial Special Issue, Games and Economic Behavior 103 (2017), 199-224.This paper analyzes two-stage rank-order tournaments. To influence efforts in the two periods, a principal can use the intertemporal prize structure and the weight of first-period performance in the second-period prize. These two instruments implement different sets of effort vectors. We characterize the optimal combination of prizes and weights as a function of parameters. For large parameter regions, the principal should only give a second-period prize, but use positive first-period performance weights. This holds no matter whether efforts in different periods are perfect or imperfect substitutes and whether the principal gives feedback on performance or not. We also generalize existing results on whether giving feedback is beneficial for the principal. 2) A Matter of Perspective: How Experience Shapes Preferences for Redistribution (with Lea Cassar).
Revise and resubmit, Management Science.We investigate in a laboratory experiment if the experience of economic failure or success shapes people’s preferences for redistribution beyond self-interest. Subjects generated a high or a low income either through a lottery or through an effort-based tournament. A sub-set of subjects could then redistribute the income of another sub-set of subjects. We find that individuals who lost the tournament (lottery) redistribute significantly more than all the other types of distributors when the inequality is generated by the tournament (lottery). The effect still holds when controlling for self-selection into different outcomes of the tournament and can be explained by in- or out-group bias and a self-serving bias in responsibility attribution. These findings have implications for public policies and for the design of compensation schemes in organizations. 3) Incentives and Motivation in Dynamic Contests (with Armin Schmutzler). Working paper.This paper compares two-stage contests with identical prize sum: (1) a single-prize contest that gives equal weight to noisy measures of first- and second period performance and (2) a sequence of two independent rank-order tournaments. Our simple theoretical model predicts higher efforts in the former case. Our experiment confirms this prediction, but the size of the effect is much smaller than expected. This result reflects two observations of independent interest. First, there is a revenge effect for laggards in the two-prize case: Laggards exert higher efforts than leaders with the same first-period effort level. Second, there is a discouragement effect for laggards in the single-prize case: Laggards exert lower efforts than leaders with the same first-period effort level. Moreover, we observe a polarization of the laggards' behavior. Together, the revenge and discouragement effects explain why the effect of moving from two prizes to one is so small, in particular, in the second period. (Web Appendix) |