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Multiple prizes for multiple tasks: externalities and the optimal design of tournaments

Author

Listed:
  • Susan Xu Tang

    (Arizona State University)

  • Yongsheng Xu

    (Georgia State University)

Abstract

This paper studies a multi-task tournament in which each agent undertakes two tasks. Agents’ efforts on one of the tasks create externalities on the performances of other competing agents. We discuss the design of an optimal tournament to achieve a social optimum in the presence of such externalities. In particular, we show that the traditional single-prized tournament is unable to elicit a social optimum, while a task-specific, multi-prized tournament proposed in this paper can achieve a socially optimal outcome.

Suggested Citation

  • Susan Xu Tang & Yongsheng Xu, 2024. "Multiple prizes for multiple tasks: externalities and the optimal design of tournaments," Journal of Economics, Springer, vol. 142(3), pages 291-303, August.
    • Handle: RePEc:kap:jeczfn:v:142:y:2024:i:3:d:10.1007_s00712-024-00858-x
    DOI: 10.1007/s00712-024-00858-x
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    References listed on IDEAS

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    1. Bardsley, Peter, 1999. "The optimal management of research portfolios," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 43(3), pages 1-13, September.
    2. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
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    4. Drago, Robert & Garvey, Gerald T, 1998. "Incentives for Helping on the Job: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 1-25, January.
    5. Yongzheng Liu & Yongsheng Xu, 2018. "Rawlsian versus Utilitarian: Teachers' Incentives and the Distribution of Student Performance," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 174(3), pages 548-569, September.
    6. Knoeber, Charles R & Thurman, Walter N, 1994. "Testing the Theory of Tournaments: An Empirical Analysis of Broiler Production," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 155-179, April.
    7. Kong-Pin Chen, 2003. "Sabotage in Promotion Tournaments," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 19(1), pages 119-140, April.
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    More about this item

    Keywords

    Tournament; Externality; Incentive mechanism; Multi-task; Single-prized tournament; Multi-prized tournament;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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