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Multiple prizes in tournaments with career concerns

Author

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  • Name Correa, Alvaro J.
  • Yildirim, Huseyin

Abstract

We introduce career concerns into rank-order tournaments and offer a novel explanation for the pervasiveness of multiple prizes. We argue that career-concerned individuals, already facing market pressure to perform, will be reluctant to participate in winner-take-all competitions. To entice them and maximize performance, the organizer promises a softer competition through multiple prizes. We show that the minimum number of prizes is single-peaked in the population's talent variance and increasing in publicly disclosed ranks. We also examine entry fees, talent pre-screening, and prize budget as design tools for tournaments, along with prize allocation.

Suggested Citation

  • Name Correa, Alvaro J. & Yildirim, Huseyin, 2024. "Multiple prizes in tournaments with career concerns," Journal of Economic Theory, Elsevier, vol. 215(C).
    • Handle: RePEc:eee:jetheo:v:215:y:2024:i:c:s0022053123001746
    DOI: 10.1016/j.jet.2023.105778
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    References listed on IDEAS

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    More about this item

    Keywords

    Tournaments; Contests; Career concerns; Ranking; Normal order statistic;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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