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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title An envelope approach to tournament design
Organization Unit
  • Christian Ewerhart
  • English
Institution University of Zurich
Series Name Working paper series / Department of Economics
Number 184
ISSN 1664-7041
Number of Pages 32
Date 2015
Abstract Text Optimal rank-order tournaments have traditionally been studied using a first-order approach. The present analysis relies instead on the construction of an "upper envelope" over all incentive compatibility conditions. lt turns out that the first-order approach is not innocuous. For example, in contrast to the traditional understanding, tournaments may be dominated by piece rates even if workers are risk-neutral. The paper also offers a strikingly simple characterization of the optimal tournament for quadratic costs and CARA utility, as well as an extension to large tournaments.
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Keywords Rank-order tournaments, first-order approach, envelope theorem, Spiel in extensiver Form, Variationsrechnung
Additional Information Revised version