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Envy and Compassion in Tournaments

Author

Listed:
  • Grund, Christian

    (RWTH Aachen University)

  • Sliwka, Dirk

    (University of Cologne)

Abstract

Many experiments indicate that most individuals are not purely motivated by material self interest, but also care about the well being of others. In this paper we examine tournaments among inequity averse agents, who dislike disadvantageous inequity (envy) and advantageous inequity (compassion). It turns out that inequity averse agents exert higher effort levels than purely self-interested agents for a given prize structure. Contrary to standard tournament theory first-best efforts can not be implemented when prizes are endogenous. Several extensions are studied like the case of spiteful agents, sabotage, asymmetric agents and an application on the choice between vertical and lateral promotions within firms.

Suggested Citation

  • Grund, Christian & Sliwka, Dirk, 2002. "Envy and Compassion in Tournaments," IZA Discussion Papers 647, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp647
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    References listed on IDEAS

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    More about this item

    Keywords

    tournaments; inequity aversion; promotions;
    All these keywords.

    JEL classification:

    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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