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Principal-Agent and Peer Relationships in Tournaments

Author

Listed:
  • Gerald Eisenkopf

    (Department of Economics, University of Konstanz, Germany)

  • Sabrina Teyssier

    (INRA-ALISS, Ivery sur Seine, France)

Abstract

Social preferences explain competitive behavior between agents and reciprocity towards a principal but there is no insight into the interaction of competition and reciprocity. We conducted a laboratory experiment with two treatments to address this issue. In a conventional tournament, an agent receives either the full prize or no prize at all. The other treatment provides the same incentives but the actual payment of an agent equals her expected payment. In both treatments the principal chooses between a low and a high guaranteed payment. Standard economic theory predicts the same effort provision in all situations. Our results show that inequity between agents’ payoffs and generosity of the principal determines the effectiveness of tournaments. Moreover, the data reveal that agents focus their preferences either on the principal or on the agent.

Suggested Citation

  • Gerald Eisenkopf & Sabrina Teyssier, 2013. "Principal-Agent and Peer Relationships in Tournaments," Working Paper Series of the Department of Economics, University of Konstanz 2013-07, Department of Economics, University of Konstanz.
    • Handle: RePEc:knz:dpteco:1307
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    File URL: http://www.uni-konstanz.de/FuF/wiwi/workingpaperseries/WP_07-Eisenkopf-Teyssier_2013.pdf
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    Cited by:

    1. Stracke, Rudi & Hörtnagl, Tanja & Kerschbamer, Rudolf, 2016. "Competing for Market Shares: Why the Order of Moves Matters Even When It Shouldn't," VfS Annual Conference 2016 (Augsburg): Demographic Change 145532, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    Tournament; Envy; Inequity; Agency problem;
    All these keywords.

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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