Effort Self-Selection and the Efficiency of Tournaments

When exogenously imposed, rank-order tournaments have incentive properties but their overall efficiency is reduced by a high variance in performance (Bull, Schotter, and Weigelt 1987). However, since the efficiency of performance-related pay is attributable both to its incentive effect and to its selection effect among employees (Lazear, 2000), it is important to investigate the ex ante sorting effect of tournaments. This paper reports results from an experiment analyzing whether allowing subjects to self-select into different payment schemes helps in reducing the variability of performance in tournaments. We show that when the subjects choose to enter a tournament, the average effort is higher and the between-subject variance is substantially lower than when the same payment scheme is imposed. Mainly based on the degree of risk aversion, sorting is efficiency-enhancing since it increases the homogeneity of the contestants. We suggest that the flexibility of the labor market is an important condition for a higher efficiency of relative performance pay.experiment ; Incentives ; performance pay ; selection ; selection ; tournament

Effort Self-Selection and the Efficiency of Tournaments

Working paper du GATE 2006-03When exogenously imposed, rank-order tournaments have incentive properties but their overall efficiency is reduced by a high variance in performance (Bull, Schotter, and Weigelt 1987). However, since the efficiency of performance-related pay is attributable both to its incentive effect and to its selection effect among employees (Lazear, 2000), it is important to investigate the ex ante sorting effect of tournaments. This paper reports results from an experiment analyzing whether allowing subjects to self-select into different payment schemes helps in reducing the variability of performance in tournaments. We show that when the subjects choose to enter a tournament, the average effort is higher and the between-subject variance is substantially lower than when the same payment scheme is imposed. Mainly based on the degree of risk aversion, sorting is efficiency-enhancing since it increases the homogeneity of the contestants. We suggest that the flexibility of the labor market is an important condition for a higher efficiency of relative performance pay.Lorsqu'ils sont imposés de manière exogène, les tournois possèdent des propriétés incitatives importantes mais leur efficacité globale est réduite par le niveau élevé de la variance de la performance des individus (Bull, Schotter et Weigelt 1987). Toutefois, dans la mesure où l'efficacité de la rémunération à la performance peut être attribuée à la fois à un effet d'incitation et à un effet de sélection parmi les salariés (Lazear 2000), il est important d'analyser l'effet de sélection ex ante des tournois. Cet article relate une expérience destinée à tester si la possibilité donnée aux sujets de choisir entre différents modes de rémunération permet de réduire la variance de la performance en tournois. Nous montrons que lorsque les sujets choisissent d'entrer en compétition, l'effort moyen est plus élevé et la variance inter-individuelle est substantiellement réduite par rapport à un traitement où le même mode de rémunération est imposé. L'auto-sélection, fondée en grande partie sur le degré d'aversion au risque, améliore l'efficience car elle accroît l'homogénéité des compétiteurs. Ceci suggère que la flexibilité du marché du travail est une condition importante pour l'accroissement de l'efficience de la rémunération à la performance

Can Rank-Order Tournaments Improve Efficiency of Quality Differentiated Crop Markets Under Marketing Loan Program Operation? The Case of U.S. Peanuts.

In the paper, alternative contractual arrangements between crop producers and processors are evaluated with a view of addressing the major issues present in peanut markets in the U.S., the major EU supplier of high quality peanuts. The issues are the thinness of the spot markets and the absence of quality premiums, both of which impair market efficiency. Results indicate that introducing contracts with a system of quality differentials creates incentives for producer self-selection to participate in the post harvest cash market. Moreover, in the presence of sufficiently high common production risk, tournament contracts are more efficient and preferred by the producers than the standard fixed premium schedules.contracts, tournaments, efficiency, spot markets, peanuts, Marketing,

Exploiting Tournament Selection for Efficient Parallel Genetic Programming

Genetic Programming (GP) is a computationally intensive technique which is naturally parallel in nature. Consequently, many attempts have been made to improve its run-time from exploiting highly parallel hardware such as GPUs. However, a second methodology of improving the speed of GP is through efficiency techniques such as subtree caching. However achieving parallel performance and efficiency is a difficult task. This paper will demonstrate an efficiency saving for GP compatible with the harnessing of parallel CPU hardware by exploiting tournament selection. Significant efficiency savings are demonstrated whilst retaining the capability of a high performance parallel implementation of GP. Indeed, a 74% improvement in the speed of GP is achieved with a peak rate of 96 billion GPop/s for classification type problems

Lack of Diversity in Leadership: Could Selective Randomness Break the Deadlock?

The proportion of women and ethnic minorities in senior management remains indefensibly low. Radical ideas are therefore needed. This paper proposes one. It is to use a form of selective randomness -- random selection from among a pool of pre-chosen and qualified candidates -- as a new HRM tool. We argue this in two parts – an equity case and an efficiency case. First, selective randomness would ensure greater equity between the sexes and races over time; offer ‘rejection insurance’ to candidates wary of discrimination, and thereby mitigate the fear of failure; and encourage women and non-whites to enter tournaments. Second, we consider also the criterion of efficiency. The standard of candidates going into management would be raised; homophily would be reduced, thus improving diversity of people and ideas, and reducing the ‘chosen one’ factor. By using Jensen’s inequality from applied mathematics, we provide the first demonstration that random selection could act to improve organizational efficiency by raising the chance of an extraordinary manager being hired

Are 18 holes enough for Tiger Woods?

This paper addresses the selection problem in promotion tournaments. I consider a situation with heterogeneous employees and ask whether an employer might be interested in repeating a promotion tournament. On the one hand, this yields a reduction in uncertainty over the employees’ abilities. On the other hand, there are costs if a workplace stays vacant

Fitness sharing and niching methods revisited

Interest in multimodal optimization function is expanding rapidly since real-world optimization problems often require the location of multiple optima in the search space. In this context, fitness sharing has been used widely to maintain population diversity and permit the investigation of many peaks in the feasible domain. This paper reviews various strategies of sharing and proposes new recombination schemes to improve its efficiency. Some empirical results are presented for high and a limited number of fitness function evaluations. Finally, the study compares the sharing method with other niching techniques

Lab Labor: What Can Labor Economists Learn from the Lab?

This paper surveys the contributions of laboratory experiments to labor economics. We begin with a discussion of methodological issues: why (and when) is a lab experiment the best approach; how do laboratory experiments compare to field experiments; and what are the main design issues? We then summarize the substantive contributions of laboratory experiments to our understanding of principal-agent interactions, social preferences, union-firm bargaining, arbitration, gender differentials, discrimination, job search, and labor markets more generally.personnel economics, principal-agent theory, laboratory experiments, labor economics

Do Tournaments Have Incentive Effects?

Much attention has been devoted to studying models of tournaments or situations in which an individual's payment depends only on his output or rank, relative to other competitors. Such models are of more than academic Interest as they may well describe the compensation structures applicable to many corporate executives and professors, to sales people whose bonuses depend on their relative outputs. and to the more obvious example of professional sports tournaments. Academic interest derives from the fact that under certain sets of assumptions tournaments have desirable normative properties because of the incentive structures they provide. Our paper uses nonexperimental data to test if tournaments actually elicit desired effort responses. We focus on golf tournaments because information on the incentive structure (prize distribution) and measures of individual output (players' scores) are both available. Under suitable assumptions, players' scores can be related to players' effort and implications for both players' overall tournament scores and their scores on the last round of a tournament drawn. In addition, data are available to control for factors other than the incentive structure that should affect output; these factors include player quality, quality of the rest of the field, difficulty of the course, and weather conditions. The data used in our analyses cane from the "1985 Golf Digest Almanac", the "Official 1985 PGA Tour Media Guide", and the "1984 PGA Tour Player Record". We find strong support for the proposition that the level and structure of prizes in PGA tournaments influence players' performance.