Self-selection and the Efficiency of Tournaments

Tor Eriksson (1) , Sabrina Teyssier (2) , Marie Claire Villeval (3)

1 Department of economics
2 Thurgau Institute of Economics
3 GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne

The literature has shown that the overall efficiency of exogenously imposed tournaments is reduced by a high variance in performance. This paper reports results from an experiment analyzing whether allowing subjects to self-select into different payment schemes is reducing the variability of performance in tournaments. We show that when the subjects choose to enter a tournament instead of a piece-rate payment scheme, the average effort is higher and the between-subject variance is substantially lower than when the same payment scheme is imposed. Mainly based on risk aversion, sorting is efficiency-enhancing since it increases the homogeneity of the contestants.

Mots clés: Tournament; Performance Pay; Incentives; Sorting; Selection; Experiment

Domaines: Economies et finances

Tor Eriksson, Sabrina Teyssier, Marie Claire Villeval. Self-selection and the Efficiency of Tournaments. Economic Inquiry, 2009, 47 (3), pp. 530-548. ⟨halshs-00451600⟩