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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | An envelope approach to tournament design |
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| 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. |
| Official URL | http://www.econ.uzh.ch/static/wp/econwp184.pdf |
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| Keywords | Rank-order tournaments, first-order approach, envelope theorem, Spiel in extensiver Form, Variationsrechnung |
| Additional Information | Revised version |