Fairness and Desert in Tournaments.
We develop a model to describe the behavior of agents who care about receiving their “just deserts” in competitive situations. In particular we analyze the strategic behavior of two identical desert-motivated agents in a rank-order tournament. Each agent is assumed to be loss averse about an endogen...
| Main Authors: | , |
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| Format: | Working paper |
| Language: | English |
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Department of Economics (University of Oxford)
2006
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| _version_ | 1797062425856442368 |
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| author | Gill, D Stone, R |
| author_facet | Gill, D Stone, R |
| author_sort | Gill, D |
| collection | OXFORD |
| description | We develop a model to describe the behavior of agents who care about receiving their “just deserts” in competitive situations. In particular we analyze the strategic behavior of two identical desert-motivated agents in a rank-order tournament. Each agent is assumed to be loss averse about an endogenous and meritocratically determined reference point that represents her perceived entitlement. Sufficiently strong desert concerns render the usual symmetric equilibrium unstable or nonexistent and allow asymmetric desert equilibria to arise in which one agent works hard while the other slacks off. As a result, agents may prefer competition for status to a random allocation, even when the supply of status is fixed. When employees are desert-motivated we find that an employer may prefer a tournament to relative performance pay linear in the difference in the agents’ outputs if output noise is sufficiently fat-tailed or if the employer can use the tournament to induce an asymmetric equilibrium. |
| first_indexed | 2024-03-06T20:45:22Z |
| format | Working paper |
| id | oxford-uuid:35b4495f-68ed-4d38-ba97-46b19a36acda |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T20:45:22Z |
| publishDate | 2006 |
| publisher | Department of Economics (University of Oxford) |
| record_format | dspace |
| spelling | oxford-uuid:35b4495f-68ed-4d38-ba97-46b19a36acda2022-03-26T13:33:30ZFairness and Desert in Tournaments.Working paperhttp://purl.org/coar/resource_type/c_8042uuid:35b4495f-68ed-4d38-ba97-46b19a36acdaEnglishDepartment of Economics - ePrintsDepartment of Economics (University of Oxford)2006Gill, DStone, RWe develop a model to describe the behavior of agents who care about receiving their “just deserts” in competitive situations. In particular we analyze the strategic behavior of two identical desert-motivated agents in a rank-order tournament. Each agent is assumed to be loss averse about an endogenous and meritocratically determined reference point that represents her perceived entitlement. Sufficiently strong desert concerns render the usual symmetric equilibrium unstable or nonexistent and allow asymmetric desert equilibria to arise in which one agent works hard while the other slacks off. As a result, agents may prefer competition for status to a random allocation, even when the supply of status is fixed. When employees are desert-motivated we find that an employer may prefer a tournament to relative performance pay linear in the difference in the agents’ outputs if output noise is sufficiently fat-tailed or if the employer can use the tournament to induce an asymmetric equilibrium. |
| spellingShingle | Gill, D Stone, R Fairness and Desert in Tournaments. |
| title | Fairness and Desert in Tournaments. |
| title_full | Fairness and Desert in Tournaments. |
| title_fullStr | Fairness and Desert in Tournaments. |
| title_full_unstemmed | Fairness and Desert in Tournaments. |
| title_short | Fairness and Desert in Tournaments. |
| title_sort | fairness and desert in tournaments |
| work_keys_str_mv | AT gilld fairnessanddesertintournaments AT stoner fairnessanddesertintournaments |