IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v122y2016icp17-30.html
   My bibliography  Save this article

Rewards versus punishments in additive, weakest-link, and best-shot contests

Author

Listed:
  • Kamijo, Yoshio

Abstract

In this study, we provide a theory to explain how bottom punishment or top reward enhances performance of teams when there is heterogeneity across players in cost–performance relationships. In contrast to the existing literature, we consider three types of performance functions: additive, weakest link (the performance is the min of performances of n contestants), and best shot (the performance is the max of performances of n contestants). For any of the three types, we derive easy-to-check sufficient conditions to judge whether reward or punishment is better. From the sufficient condition for the additive performance function, we know that punishment is better for less heterogeneous people and reward is better for more heterogeneous people. In addition, the sufficient conditions for the best-shot and weakest-link cases suggest that some unintuitive results hold; even under the best-shot (weakest link) performance function, the bottom punishment (top reward) becomes better when the gap in the abilities of contestants becomes very small (large).

Suggested Citation

  • Kamijo, Yoshio, 2016. "Rewards versus punishments in additive, weakest-link, and best-shot contests," Journal of Economic Behavior & Organization, Elsevier, vol. 122(C), pages 17-30.
    • Handle: RePEc:eee:jeborg:v:122:y:2016:i:c:p:17-30
    DOI: 10.1016/j.jebo.2015.11.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268115003091
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2015.11.013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Philip Brookins & Dmitry Ryvkin, 2014. "An experimental study of bidding in contests of incomplete information," Experimental Economics, Springer;Economic Science Association, vol. 17(2), pages 245-261, June.
    3. Benny Moldovanu & Aner Sela, 2008. "The Optimal Allocation of Prizes in Contests," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 615-631, Springer.
    4. Andrew Schotter & Keith Weigelt, 1992. "Asymmetric Tournaments, Equal Opportunity Laws, and Affirmative Action: Some Experimental Results," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 511-539.
    5. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 551-575.
    6. Robert Akerlof & Richard Holden, 2012. "The nature of tournaments," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(2), pages 289-313, October.
    7. Michael R. Baye & Dan Kovenock & Casper G. Vries, 2008. "Rigging the lobbying process: An application of the all-pay auction," Springer Books, in: Roger D. Congleton & Kai A. Konrad & Arye L. Hillman (ed.), 40 Years of Research on Rent Seeking 2, pages 331-336, Springer.
    8. Kenneth S. Chan & Stuart Mestelman & Rob Moir & R. Andrew Muller Moir, 1996. "The Voluntary Provision of Public Goods under Varying Income Distributions," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 54-69, February.
    9. Green, Jerry R & Stokey, Nancy L, 1983. "A Comparison of Tournaments and Contracts," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 349-364, June.
    10. Gerlinde Fellner & Yoshio Iida & Sabine Kröger & Erika Seki, 2010. "Heterogeneous Productivity in Voluntary Public Good Provision: an Experimental Analysis," Cahiers de recherche 1025, CIRPEE.
    11. Kohei Nitta, 2014. "The Effect of Income Heterogeneity in An Experiment with Global and Local Public Goods," Working Papers 201403, University of Hawaii at Manoa, Department of Economics.
    12. Donald Wittman, 1984. "Liability for Harm or Restitution for Benefit?," The Journal of Legal Studies, University of Chicago Press, vol. 13(1), pages 57-80, January.
    13. Benny Moldovanu & Aner Sela & Xianwen Shi, 2012. "Carrots And Sticks: Prizes And Punishments In Contests," Economic Inquiry, Western Economic Association International, vol. 50(2), pages 453-462, April.
    14. Barut, Yasar & Kovenock, Dan, 1998. "The symmetric multiple prize all-pay auction with complete information," European Journal of Political Economy, Elsevier, vol. 14(4), pages 627-644, November.
    15. Andreoni, James & Gee, Laura K., 2012. "Gun for hire: Delegated enforcement and peer punishment in public goods provision," Journal of Public Economics, Elsevier, vol. 96(11), pages 1036-1046.
    16. Barry J. Nalebuff & Joseph E. Stiglitz, 1983. "Prices and Incentives: Towards a General Theory of Compensation and Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 21-43, Spring.
    17. Jack Hirshleifer, 1983. "From weakest-link to best-shot: The voluntary provision of public goods," Public Choice, Springer, vol. 41(3), pages 371-386, January.
    18. Mark Gradstein, 1995. "Intensity Of Competition, Entry And Entry Deterrence In Rent Seeking Contests," Economics and Politics, Wiley Blackwell, vol. 7(1), pages 79-91, March.
    19. Fisher, Joseph & Isaac, R. Mark & Schatzberg, Jeffrey W & Walker, James M., 1995. "Heterogenous Demand for Public Goods: Behavior in the Voluntary Contributions Mechanism," Public Choice, Springer, vol. 85(3-4), pages 249-266, December.
    20. Fangfang Tan, 2008. "Punishment in a Linear Public Good Game with Productivity Heterogeneity," De Economist, Springer, vol. 156(3), pages 269-293, September.
    21. Thomas, Jonathan P. & Wang, Zhewei, 2013. "Optimal punishment in contests with endogenous entry," Journal of Economic Behavior & Organization, Elsevier, vol. 91(C), pages 34-50.
    22. David Dickinson, 2001. "The Carrot vs. the Stick in Work Team Motivation," Experimental Economics, Springer;Economic Science Association, vol. 4(1), pages 107-124, June.
    23. Kamijo, Y. & Nihonsugi, T. & Takeuchi, A. & Funaki, Y., 2014. "Sustaining cooperation in social dilemmas: Comparison of centralized punishment institutions," Games and Economic Behavior, Elsevier, vol. 84(C), pages 180-195.
    24. Glazer, Amihai & Hassin, Refael, 1988. "Optimal Contests," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 133-143, January.
    25. Buckley, Edward & Croson, Rachel, 2006. "Income and wealth heterogeneity in the voluntary provision of linear public goods," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 935-955, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Aner Sela, 2020. "Optimal allocations of prizes and punishments in Tullock contests," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(3), pages 749-771, September.
    2. Aner Sela & Maya Amiad, 2016. "The Optimal Allocation Of Punishments In Tullock Contests," Working Papers 1613, Ben-Gurion University of the Negev, Department of Economics.
    3. Aner Sela & Amit Yeshayahu, 2022. "Contests with identity-dependent externalities," Working Papers 2203, Ben-Gurion University of the Negev, Department of Economics.
    4. Liu, Bin & Lu, Jingfeng, 2023. "Optimal orchestration of rewards and punishments in rank-order contests," Journal of Economic Theory, Elsevier, vol. 208(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yoshio Kamijo, 2014. "A theory of sanctions: Objectives, degree of heterogeneity, and growth potential matter for optimal use of carrot or stick," Working Papers SDES-2014-13, Kochi University of Technology, School of Economics and Management, revised Oct 2014.
    2. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    3. Loukas Balafoutas & E. Glenn Dutcher & Florian Lindner & Dmitry Ryvkin, 2017. "The Optimal Allocation Of Prizes In Tournaments Of Heterogeneous Agents," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 461-478, January.
    4. Minchuk, Yizhaq & Sela, Aner, 2014. "All-pay auctions with certain and uncertain prizes," Games and Economic Behavior, Elsevier, vol. 88(C), pages 130-134.
    5. Benny Moldovanu & Aner Sela & Xianwen Shi, 2012. "Carrots And Sticks: Prizes And Punishments In Contests," Economic Inquiry, Western Economic Association International, vol. 50(2), pages 453-462, April.
    6. Pradeep Dubey & Siddhartha Sahi, 2016. "Optimal Prizes," Department of Economics Working Papers 16-03, Stony Brook University, Department of Economics.
    7. Sela, Aner, 2016. "The Optimal Allocation of Punishments in Tullock Contests," CEPR Discussion Papers 11592, C.E.P.R. Discussion Papers.
    8. Dutcher, E. Glenn & Balafoutas, Loukas & Lindner, Florian & Ryvkin, Dmitry & Sutter, Matthias, 2015. "Strive to be first or avoid being last: An experiment on relative performance incentives," Games and Economic Behavior, Elsevier, vol. 94(C), pages 39-56.
    9. Subhasish M. Chowdhury & Patricia Esteve‐González & Anwesha Mukherjee, 2023. "Heterogeneity, leveling the playing field, and affirmative action in contests," Southern Economic Journal, John Wiley & Sons, vol. 89(3), pages 924-974, January.
    10. Aner Sela, 2020. "Optimal allocations of prizes and punishments in Tullock contests," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(3), pages 749-771, September.
    11. Pradeep Dubey & Siddhartha Sahi, 2009. "The Allocation of a Prize," Department of Economics Working Papers 09-01, Stony Brook University, Department of Economics.
    12. Aner Sela, 2002. "Contest Architecture (jointly with Benny Moldovanu)," Theory workshop papers 357966000000000088, UCLA Department of Economics.
    13. Ella Segev & Aner Sela, 2014. "Sequential all-pay auctions with head starts," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 43(4), pages 893-923, December.
    14. Dubey, Pradeep, 2013. "The role of information in contests," Economics Letters, Elsevier, vol. 120(2), pages 160-163.
    15. Letina, Igor & Liu, Shuo & Netzer, Nick, 2023. "Optimal contest design: Tuning the heat," Journal of Economic Theory, Elsevier, vol. 213(C).
    16. Drugov, Mikhail & Ryvkin, Dmitry, 2020. "Tournament rewards and heavy tails," Journal of Economic Theory, Elsevier, vol. 190(C).
    17. Bastani, Spencer & Giebe, Thomas & Gürtler, Oliver, 2022. "Simple equilibria in general contests," Games and Economic Behavior, Elsevier, vol. 134(C), pages 264-280.
    18. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications,, Elsevier.
    19. Sheremeta, Roman, 2009. "Essays on Experimental Investigation of Lottery Contests," MPRA Paper 49888, University Library of Munich, Germany.
    20. Aner Sela, 2022. "Status Classification By Lottery Contests," Working Papers 2206, Ben-Gurion University of the Negev, Department of Economics.

    More about this item

    Keywords

    Contest theory; Heterogeneity; Punishment; Reward;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:122:y:2016:i:c:p:17-30. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.