Head starts in dynamic tournaments?

In promotion contests or other tournament-like situations, a principal may attach some value to the highest effort expended by an agent. We show that whenever agents interact over multiple periods, awarding a head start to one of them is optimal even with completely symmetric agents. Awarding a smal...

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Bibliographic Details
Published in:Economics letters 2016-12, Vol.149, p.94-97
Main Authors: Denter, Philipp, Sisak, Dana
Format: Article
Language:English
Subjects:
Actuarial assumptions
Contests
Game theory
Head start
Personnel economics
Studies
Tournaments
Tournaments & championships
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Summary:In promotion contests or other tournament-like situations, a principal may attach some value to the highest effort expended by an agent. We show that whenever agents interact over multiple periods, awarding a head start to one of them is optimal even with completely symmetric agents. Awarding a small head start increases maximum individual effort without decreasing aggregate effort. •We study head starts in dynamic two-player tournaments a la Lazear and Rosen (1981).•A principal values aggregate effort and the highest effort exerted by the players.•It is always optimal to bias the tournament by awarding a head start.•A small head start increases the highest effort without decreasing aggregate effort.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2016.10.008