Ex post unbalanced tournaments

Abstract

Tournaments create strong incentives under the assumption that the competition between the agents is balanced. If, at the outset, one agent is stronger than the other, the tournament is ex ante unbalanced and incentives break down. Handicaps can in this case restore incentives. In practice, competing agents are often overall equally strong but have different sorts of strengths. Then, competition will typically be unbalanced ex post and incentives break down, but handicaps cannot be used. We show how a simple means, introducing the possibility of a tie, can often resolve the problem. We examine under what conditions incentives are maximized by ties.

Contests With Draws: Axiomatization and Equilibrium

“…The idea of relating the occurrence of a draw to a threshold performance gap, which is common to all aforementioned models, dates back at least to Nalebuff and Stiglitz (). Other contributions that follow this approach include Eden () and Imhof and Kräkel (, ). The crucial difference between these models and ours is that, while they all introduce a draw when the performance gap falls below an exogenous level, we assume a continuous proportionality between our success function and the success function of a contest without draw, where the latter is scaled down to allow for the draw possibility.…”

Optimal favoritism in all-pay auctions and lottery contests

“…4 Moreover, our study contributes to the recent interest in the analysis of head starts in different competitive situations, comp. Kirkegaard (2012), [23], Seel and Wasser (2014), [35], Li and Yu (2012), [28], Segev and Sela (2014), [36], Konrad (2002), [25], as well as Imhof and Kräkel (2016), [21]. However, all of the mentioned studies (as most of the literature) are either restricted to the two-player case or focus exclusively on only one of the two instruments.…”

Too big to succeed? Overstaffing in firms

“…5 The seminal Lazear and Rosen (1981) has spawned a large literature that analyzes promotion-based incentives. Examples of the topics that have been explored by using tournament models are handicapping (e.g., Imhoff & Kräkel, 2016), R&D competitions (e.g., Boudreau et al, 2016), Chief Executive Officer remuneration (e.g., Rosen, 1986), sabotage (e.g., Lazear, 1999), risk taking (e.g., Hvide, 2002), multistage tournaments (e.g., Goltsman & Mukherjee, 2011), and relational contracts (e.g., Zabojnik, 2012). Somewhat surprisingly, the tournament literature has not analyzed overstaffing before.…”