Do Tournaments Have Incentive Effects?

Much attention has been devoted to studying models of tournaments or situations in which an individual\u27s payment depends only on his or her output or rank relative to that of other competitors. 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 whether tournaments actually elicit effort responses. We focus on professional golf tournaments because information on the incentive structure (prize distribution) and measures of individual output (players\u27 scores) are both available. We find strong support for the proposition that the level and structure of prizes in PGA tournaments influence players\u27 performance

The Incentive Effects of Tournaments Revisited: Evidence From the European PGA Tour

This analysis of data from the 1987 European Men\u27s Professional Golf Association (PGA) Tour strongly supports the hypothesis that the level and structure of prizes in PGA tournaments influence players\u27 performance. Specifically, players\u27 performance appears to vary positively with both the total money prizes awarded in a tournament and the marginal return to effort in the final round of play (a value that varies among players largely depending on how the prize money is allocated among finishers of different ranks). The authors suggest that these results, together with the similar results of their earlier study of the 1984 U.S. Men\u27s PGA Tour, may have implications for the design of compensation systems for certain groups of workers, such as corporate executives, college professors, and salespeople

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.

Justifying top management pay in a transitional economy

We investigate some aspects of top management pay in China\u27s listed firms. We find positive pay and performance sensitivities and elasticities for top executives. In terms of magnitude, these sensitivities are similar to those reported in U.S. firms during the 1970s. However, the pay and performance relation is slightly weaker for firms located in less developed provinces. We also find that the pay disparities between top managers and employees are positively related to a firm\u27s performance. Thus, it appears that any deviation away from a manager-worker compensation norm has to be justified by superior firm performance. In additional analyses, we find that managers\u27 perquisites are not related to performance

A Service of zbw World of Labor Evidence-based policy making

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Executive Compensation: A Brief Review

Chief executive officer (CEO) compensation is defined as the sum of base pay, bonuses, stock grants, stock options, other forms of compensation and benefits. Inflation?adjusted, median total CEO compensation in the United States almost tripled between 1992 and 2000, with grants of stock options evolving to be the largest component of compensation. This article presents the arguments for and against this level and composition of CEO compensation.CEO compensation

Corporate Tournaments.

This study examines aspects of pay and promotion in corporate hierarchies in the context of tournament theory. Evidence supports the tournament perspective in that most positions are filled through promotion and pay rises strongly with hierarchical level. Furthermore, the winner's prize in the CEO tournament increases with the number of competitors for the CEO position. Not all evidence is supportive: the square of the number of competitors is negatively associated with the CEO prize. Additionally, firms do not appear to maintain short-term promotion incentives, as lengthier time in position prior to a promotion reduces the pay increase from the promotion. Copyright 2001 by University of Chicago Press.

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 or her output or rank relative to that of other competitors. Under certain sets of assumptions, tournaments have desirable normative properties because of the incentive structures they provide. Our paper uses nonexperimental data to test whether tournaments actually elicit effort responses. We focus on professional golf tournaments because information on the incentive structure (prize distribution) and measures of individual output (players' scores) are both available. We find string support for the proposition that the level and structure of prizes in PGA tournaments influence players performance. Copyright 1990 by University of Chicago Press.