PERFORMANCE AND WELFARE EFFECTS OF TOURNAMENT CONTRACTS: SOME EXPERIMENTAL EVIDENCE

Using experimental economics, we compare the efficiency and welfare effects of tournament and fixed standards contracts. Our findings suggest that economic agents are generally better off under fixed standard contracts unless they face substantial common shocks. Administrators of contracts (principals) also tend to be better off under fixed standard contracts for moderate to small common shocks. Efficiency wise, agents tend to exert higher effort under fixed standard contracts. Moreover, effort under tournaments appears to be declining in the variance of the common shock. Our results suggest that a ban on tournament contracts may generally be better off for both growers and processors except in cases where common shocks are large.


Subject(s):
Issue Date:
2003
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/21938
Total Pages:
42
Series Statement:
Selected Paper




 Record created 2017-04-01, last modified 2017-08-24

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