nep-spo New Economics Papers
on Sports and Economics
Issue of 2020‒01‒20
one paper chosen by
Humberto Barreto
DePauw University

  1. The Perks of Being in the Smaller Team: Incentives in Overlapping Contests By Christoph March; Marco Sahm

  1. By: Christoph March; Marco Sahm
    Abstract: We investigate overlapping contests in multi-divisional organizations in which an individual’s effort simultaneously determines the outcome of several contests on different hierarchical levels. We show that individuals in smaller units are advantaged in the grand (organization-wide) contest for two reasons: First, the incentive to free-ride is smaller in inter-divisional contests. Second, competition in the intra-divisional contest is less fierce. Both effects induce a higher marginal utility of effort provision. We test the model in a laboratory experiment and confirm its main predictions. Our results have important consequences for the provision of incentives in organizations and the design of sports competitions.
    Keywords: contest, rent-seeking, hierarchy, teams, experiment
    JEL: C72 C92 D72
    Date: 2019

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