A Comparison of Tournaments and Contracts

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 agents' 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 distribution of the common shock is sufficiently diffuse, using the optimal tournament dominates using optimal independent contracts. Finally, it is shown that for a sufficiently large number of agents, a principal who cannot observe the common shock but uses the optimal tournament, does as well as one who can observe the shock and uses independent contracts.

Program Notes- May 1979

https://neiudc.neiu.edu/programnotes/1019/thumbnail.jp

(Neither) Expatriates (n)or Immigrants? The American Colony in Paris, 1880-1940

The Left Bank American expatriates in Paris of the 1920s have captured the American and French imagination for decades. But there was another group of Americans in Paris less well known yet ten times more numerous and arguably more important for the “American Century.” The Americans of the Right Bank included bankers and businessmen who went abroad for years if not a lifetime. They were implicit and often explicit “Americanizers,” bringing American goods and methods overseas. These “elite migrants” take us to the heart of the problems of defining migration. They were largely well-to-do; they went to France by choice. We can ask an Albert Hirschman question: to what extent did the businessmen have their own particular brand of “exit,” expressed through a distinctive “voice” (such as the bulletins of the American Chamber of Commerce) and reflecting “loyalty” rather than its opposite (Hirschman, 1970)? Far from the Bohemians of the Left Bank, the Right Bank Americans in Paris do not quite fit the usual history of immigration, but they show that specific forms of mobility and globalization existed well before the late 20th century.Les écrivains et artistes américains qui habitaient la Rive Gauche de la Seine dans les années 1920 sont bien connus, mais un groupe d’Américains dix fois plus nombreux s’installait sur la Rive Droite à la même époque. Ces hommes d’affaires et banquiers, emblématiques du « siècle américain », apportaient avec eux leurs biens et méthodes américaines. Ces « migrants d’élite » posent la question suivante : comment définit-on l’immigration ? Ni « travailleurs immigrés », ni réfugiés, ils étaient aisés pour la plupart, et ils venaient en France par choix. Dans quelle mesure combinaient-ils les options posées par Albert Hirschman en effectuant une « exit », une sortie choisie, exprimant leur « voix » distincte, plutôt loyale que critique. Les Américains de la Rive droite étaient loin des rebelles bohèmes de la Rive Gauche et n’entrent pas dans les catégories habituelles de l’histoire de l’immigration. Mais, ils montrent comment une mobilité d’élite et une forme de globalisation/Américanisation a commencé dès la première moitié du vingtième siècle

A Comparison of Tournaments and Contracts

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 distribution of the common shock is sufficiently diffuse, using the optimal tournament dominates using optimal independent contracts. Finally, it is shown that for a sufficiently large number of agents, a principal who cannot observe the common shock but uses the optimal tournament does as well as one who can observe the shock and uses independent contracts.Economic

Industrial Data Systems, Inc.

Industrial Date Systems Corporation (IDS) is a Houston-based general engineering and services firm targeted toward the energy industry. Founded in 1985, the company has grown to annual revenues of $17 million in FY2000, sixty-three percent from engineering and the remainder from its manufacturing and air handling divisions. Recently, IDS has acquired Petrocon Engineering, a much larger oilfield engineering and services from with FY2000 revenues of$68 million. Together, they potentially will be able to fully meet client need for both upstream and downstream engineering and services support in the oil/gas, refining, chemicals, and petrochemicals industries. Now they must make it work. (Contact author for a copy of the complete report.)Small Business Mgmt