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Homogenous and Heterogenous Contestants in Piece Rate Tournaments: Theory and Empirical Analysis

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  • Tomislav Vukina
  • Xiaoyong Zheng

Abstract

In this article we show that sorting different ability contestants in piece rate tournaments into more homogenous groups alters agents' incentives to exert effort. We propose a method for structurally estimating the piece rate tournament game with heterogenous players and apply it to the payroll data from a broiler production contract. Our counterfactual analysis shows that under reasonable assumptions, both the principal and the growers can gain when the tournament groups are heterogenized. This business strategy could be difficult to implement in real-life settings, however. This article has supplementary material online.

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  • Tomislav Vukina & Xiaoyong Zheng, 2011. "Homogenous and Heterogenous Contestants in Piece Rate Tournaments: Theory and Empirical Analysis," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(4), pages 506-517, October.
    • Handle: RePEc:taf:jnlbes:v:29:y:2011:i:4:p:506-517
    DOI: 10.1198/jbes.2010.08345
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    5. Armando Levy & Tomislav Vukina, 2004. "The League Composition Effect in Tournaments with Heterogeneous Players: An Empirical Analysis of Broiler Contracts," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 353-378, April.
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    Cited by:

    1. Hammond, Robert G. & Zheng, Xiaoyong, 2013. "Heterogeneity in tournaments with incomplete information: An experimental analysis," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 248-260.
    2. Wang Zhen & Vukina Tomislav, 2019. "Sorting into Contests: Evidence from Production Contracts," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(1), pages 1-15, January.
    3. Zhen Wang & Tomislav Vukina, 2017. "Welfare effects of payment truncation in piece rate tournaments," Journal of Economics, Springer, vol. 120(3), pages 219-249, April.
    4. Wang, Zhen & Vukina, Tomislav, 2017. "Sorting into Contests: Evidence from Production Contracts," ARE Working Papers 262930, North Carolina State University, Department of Agricultural and Resource Economics.

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