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Tournament Theory - Basic Model, Theoretical Implications, and Empirical Evidence

Title: Tournament Theory - Basic Model, Theoretical Implications, and Empirical Evidence

Seminar Paper , 2004 , 21 Pages , Grade: 1

Autor:in: Denis Drechsler (Author)

Leadership and Human Resources - Miscellaneous
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Wie lassen sich Unterschiede im Lohnniveau erklären? Tournament Theory vertritt die Ansicht, dass Firmen eine auf Anreize ausgelegte Beförderungsstrukture wählen, die einem Turnier gleicht. Damit, so die Befürworter der Theorie, lassen sich die hohen Gehälter von Unternehmensvorständen sowie die weite Spanne zwischen den Gehältern der Unternemensführung sowie der übrigen Belegschaft erklären. Die vorliegende Arbeit präsentiert die Grundtheorie und erläutert anhand vieler Beispiele, wie diese Anwendung finden kann im täglichen Leben. Untersucht werden u.a. die Bereiche des professionellen Sports, große Aktienunternehmen sowie kleine und mittelständische Unternehmen.

Excerpt


Table of Contents

  • Introduction
  • Basic Model
  • Testing Tournament Theory
    • Experimental Studies
    • Professional Sports
    • Studies on the Corporate Level

Objectives and Key Themes

This paper aims to provide a comprehensive overview of tournament theory, including its basic model, implications, and empirical evidence. It focuses on the theoretical framework and examines how tournament theory can explain various phenomena in labor economics.

  • The relationship between workers' relative performance and their compensation.
  • The use of tournaments as a mechanism to overcome information asymmetry in labor markets.
  • The impact of tournament theory on wage structures, promotions, and executive compensation.
  • The role of noise and effort in tournament outcomes.
  • Empirical studies on the validity of tournament theory in different settings.

Chapter Summaries

The introduction provides a foundation for the paper, discussing the evolution of compensation schemes and the limitations of standard economic theory in explaining wage determination. It introduces the concept of tournament theory as an alternative framework for understanding work relationships.

The section on the basic model delves into the core principles of tournament theory. It outlines the key assumptions and predictions of rank-order tournaments, including the importance of relative performance, fixed prize structures, and the role of noise in effort-productivity relationships. The model highlights how tournaments can incentivize workers and overcome the challenges associated with measuring individual output.

Keywords

Tournament theory, rank-order tournaments, incentive mechanisms, relative performance, wage determination, labor economics, information asymmetry, effort-productivity relationship, empirical evidence, experimental studies, professional sports, corporate level.

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Details

Title
Tournament Theory - Basic Model, Theoretical Implications, and Empirical Evidence
College
University of Wisconsin-Milwaukee
Grade
1
Author
Denis Drechsler (Author)
Publication Year
2004
Pages
21
Catalog Number
V186067
ISBN (eBook)
9783656995449
ISBN (Book)
9783656995456
Language
English
Tags
tournament theory basic model theoretical implications empirical evidence
Product Safety
GRIN Publishing GmbH
Quote paper
Denis Drechsler (Author), 2004, Tournament Theory - Basic Model, Theoretical Implications, and Empirical Evidence, Munich, GRIN Verlag, https://www.grin.com/document/186067
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