A Comparison of Tournaments and Contracts

@article{Green1983ACO,
  title={A Comparison of Tournaments and Contracts},
  author={J. R. Green and Nancy L. Stokey},
  journal={Journal of Political Economy},
  year={1983},
  volume={91},
  pages={349 - 364}
}
Tournaments, reward structures based on rank order, are compared with individual contracts in a model with one risk-neutral principal and many risk-averse agents. Each agent's output is a stochastic function of his effort level plus an additive shock term that is common to all the agents. The principal observes only the output levels of the agents. It is shown that, in the absence of a common shock, using optimal independent contracts dominates using the optimal tournament. Conversely, if the… Expand
965 Citations
Rank-order tournaments and selection
The nature of tournaments
Screening with tournaments
Tournaments as a response to ambiguity aversion in incentive contracts
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