the thrill of victory measuring the incentive to win there is ample evidence that incentive pay structures such as tournaments result in increased performance is this due to selection or increased individual effort and is any increased individual effort caused by pecuniary incentives or merely thirst for the thrill of victory tov prior literature has not separated the different effects we look at performance in horse and dog racing and find that only horses controlled by jockeys during the race exhibit performance corresponding to pecuniary incentives while both respond to selection and tov the results show that pay structures do matter

state characteristics and the location of foreign direct investment within the united states a conditional logit model of the location decision of foreign firms investing in manufacturing facilities in the united states is developed and estimated the authors results for 1981 83 indicate that states with higher per capita incomes and higher densities of manufacturing activity attracted relatively more foreign direct investment in addition higher wages deterred foreign direct investment while higher unemployment rates attracted it surprisingly higher unionization rates were associated with increased foreign direct investment overall higher taxes deterred foreign direct investment however more extensive transportation infrastructures and larger promotional expenditures were associated with increased foreign direct investment copyright 1991 by mit press

determinants of u s direct investment in the e e c revisited abstract this paper expands upon an earlier work in this review concerning the specification of a model to identify the determinants of u s direct foreign investment dfi in the e e c compared to earlier studies a longer data series is used an improved tariff discrimination proxy is employed and predicted sales are estimated and used as the output variable in the empirical work a variable to capture the effect of the u s capital control programs is also included the findings reaffirm the importance of market size especially in the plant and equipment equations as being an important determinant of dfi strong support was also found for the growth hypothesis consistent statistical support was found for the tariff discrimination hypothesis in addition the findings imply that a variable to capture the effects of fluctuating exchange rates should be included in future studies

self selection and the efficiency of tournaments when exogenously imposed rank order tournaments have incentive properties but their overall efficiency is reduced by a high variance in performance bull schotter and weigelt 1987 however since the efficiency of performance related pay is attributable both to its incentive effect and to its selection effect among employees lazear 2000 it is important to investigate the ex ante sorting effect of tournaments this paper reports results from an experiment analyzing whether allowing subjects to self select into different payment schemes helps in reducing the variability of performance in tournaments we show that when the subjects choose to enter a tournament the average effort is higher and the between subject variance is substantially lower than when the same payment scheme is imposed sorting is efficiency enhancing since it increases the homogeneity of the contestants we suggest that the flexibility of the labor market is an important condition for a higher efficiency of relative performance pay

the expansion of foreign direct investments discrete rational location choices or a cultural learning process it is recognized in the literature that experience may affect the cost and the uncertainty of operating in foreign markets and experience and market knowledge may therefore influence the location decisions of fdis economic theory does not however predict a general expansion pattern of fdis across industries on the other hand the theory associated with the internationalization process approach highlights the importance of cultural distance and predicts a movement from close to more distant markets as more experience is acquired by the firm the internationalization process approach is rooted in a behavioral theory of the firm

designing optimal sales contests a theoretical perspective sales contests are commonly used by firms as a short term motivational device to increase salespeople s efforts conceptually sales contests and piece rate schemes such as salary commission or quotas differ in that in sales contests payment to salespeople is based on relative rather than absolute sales levels using the agency theoretic framework where the firm is risk neutral and the salespeople are risk averse we examine how a firm should design an optimal contest to maximize its profit through stimulating salespeople s efforts specifically we investigate how many salespeople should be given awards and how the reward should be allocated between the winners three commonly used sales contest formats are studied in the first format termed as rank order tournament there are many winners and the amount of reward is based on relative rank achieved with larger amounts awarded to higher ranks we also examine two special cases of rank ordered tournament a multiple winners format where the reward is shared equally and a winner take all format where a single winner gets the entire reward we model salespeople s behavior by considering utility of the reward from achieving one of the winning ranks in the contest and assessing incremental chances of winning by exerting more effort the analysis was done for two situations based on whether the total reward is large enough for salespeople to participate in the effort maximizing sales contest or not the analysis shows that factors impacting contest design include the salespeople s degree of risk aversion number of salespeople competing in the contest and degree of sales uncertainty which reflects strength of the sales effort relationship the results show that salespeople exert lower effort when there are larger numbers of participants or when sales uncertainty is high we find that the rank order tournament is superior to the multiple winners contest format in a multiple winners format the salesperson whose performance is just sufficient to win is better off than any of the other winners as he exerts the least effort to win but obtains as high a reward as any other winners specific recommendations on contest designs are obtained assuming that sales follow either a logistic or uniform distribution assuming that sales outcome is logistically distributed and the contest budget is high enough to ensure participation our analysis shows that the total number of winners in a sales contest should not exceed half the number of the contestants this result is due to the symmetric nature of the logistic distribution our analysis also indicates that the total number of winners should be increased and the spread decreased when salespeople are more risk averse when salespeople are more risk averse their marginal values for higher rewards become smaller the spread should increase with ranks when rate of risk tolerance is high and decrease with ranks when the rate of risk tolerance is lower in the extreme case of risk neutral salespeople the optimal design is a winner take all format we also conclude that since the probability of winning the contest decreases with number of contestants the optimal number of winners should increase and interrank spread decrease when there are a larger number of participants if the firm does not allocate a large enough budget for salespeople to participate in the effort maximizing sales contest then the firm may increase the number of winners to more than half the sales force increasing the number of winners and decreasing the spread are required to encourage the salespeople to participate particularly when there are many participants who are risk averse a counterintuitive result is that the number of winners should be reduced and the spread increased when sales uncertainty is high increasing sales uncertainty leads to lower equilibrium effort levels while keeping the expected utility of the contest rewards the same therefore increased uncertainty results in higher participation incentive the firm should thus relatively reduce the number of winners in high uncertainty situations under the assumption of uniformly distributed sales the recommendation is that a winner take all contest induces maximum efforts regardless of the level of risk aversion number of players or the degree of uncertainty when the winner take all format does not meet the participation constraint our analysis recommends offering a big reward to the top salesperson and a small reward to many other sales people the small reward should be just sufficient to ensure that all salespeople participate consistent with logistic distribution the spread should decrease when salespeople are more risk averse or there are more players but should increase when sales uncertainty is larger these results highlight that some of the conclusions drawn may be sensitive to distributional assumptions

determinants of u s direct investment in the e e c revisited again abstract this paper discusses the scaperlanda balough comment on a previous study of mine that appeared in this review the scaperlanda balough paper extends and improves upon my study by employing better variables to test the hypotheses however i offer a different interpretation of the empirical evidence they present concerning the efficacy of the u s controls on direct investment

efficiency gains from organizational innovation comparing ordinal and cardinal tournament games in broiler contracts abstract we analyze the contract settlement data of a poultry company who contracts the production of broiler chickens with a group of independent growers the company originally used rank order ordinal tournaments to compensate their contract growers and later switched to cardinal tournaments based on the observed payment mechanism we construct an empirical model of a rank order tournament game and estimate structural parameters of the symmetric nash equilibrium and then simulate growers performance under the observed cardinal tournament contract we found that the model with risk averse agents fits the data better than the model with risk neutral agents and that switching from a rank order tournament to a cardinal tournament while keeping the growers ex ante expected utility constant improved efficiency the principal company gains from the switch whereas some of the agents growers gain and others lose depending on their realized productivity shocks

interactions between incentive instruments contracts and quality in processing tomatoes contracting and other forms of vertical coordination are important parts of the supply chains for many agricultural products often the buyer cares about multiple product attributes affected by a grower s actions using data that are insulated from common methodological problems we test whether or not price incentives for two processing tomato quality attributes exhibit complementarity in improving delivered quality price incentives for the two attributes are substitutes for the provision of one and complements for the other this finding has consequences for the profit maximizing choice of incentive instruments for processors and contributes to the literature regarding tests for complementarities

contract farming and smallholder incentives to produce high quality experimental evidence from the vietnamese dairy sector in emerging markets for high value food products in developing countries processing companies search for efficient ways to source raw material of high quality one widely embraced approach is contract farming but relatively little is known about the appropriate design of financial incentives in a small farm context we use the example of the vietnamese dairy sector to analyze the effectiveness of existing contracts between a processor and smallholder farmers in terms of incentivizing the production of high quality milk a framed field experiment is conducted to evaluate the impact of two incentive instruments a price penalty for low quality and a bonus for consistent high quality milk on farmers investment in quality improving inputs statistical analysis suggests that the penalty drives farmers into higher input use resulting in better output quality the bonus payment generates even higher quality milk we also find that input choice levels depend on farmers socio economic characteristics such as wealth while individual risk preferences seem to be less important implications for the design of contracts with smallholders are discussed

incentives for helping on the job theory and evidence recent advances in incentive theory stress the multidimensional nature of agent effort and specifically cases where workers affect one anothers performance through helping efforts this article models helping efforts as determined by the compensation package and task allocation the model is tested with australian evidence on reported helping efforts within work groups the evidence consistently supports the hypothesis that helping efforts are reduced while individual efforts are increased when promotion incentives are strong piece rates and profit sharing appear to have little effect on helping efforts while task variety and helping efforts are positively correlated

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 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 scores are both available we find strong support for the proposition that the level and structure of prizes in pga tournaments influence players performance

economic contests comparative reward schemes contests are situations in which an individual s reward depends on his performance relative to others students are graded on a curve the candidate with the most votes gets the political office the underling who performs best is promoted to the executive position contests are useful in dealing with indivisible rewards reducing monitoring costs and minimizing risks from common uncertainties they are employed to sort potential participants and once they have entered to induce appropriate effort from them with monitoring precision and prize spreads as potential choice variables optimal contest structures are derived for fair and unfair contests among equal and unequal participants the converse problems of climbing low ability individuals enter the contest designed for high ability candidates and slumming are shown to be manageable

testing the theory of tournaments an empirical analysis of broiler production broiler chickens are raised by contract growers whose rewards depend explicitly upon relative performance we use data on the performance of broiler producers facing both tournament and linear performance evaluation compensation structures to test three predictions from the theory of tournaments that changes in the level of prizes that leave prize differentials unchanged will not affect performance that in mixed tournaments more able players will choose less risky strategies and that tournament organizers will attempt to handicap players of unequal ability or reduce mixing to avoid the disincentive effects of mixed tournaments our evidence is consistent with each prediction

quitters never win the adverse incentive effects of competing with superstars internal competition may motivate worker effort yet the benefits of competition may depend critically on workers relative abilities large skill differences may reduce efforts i use panel data from professional golf tournaments and find that the presence of a superstar is associated with lower performance on average golfers first round scores are approximately 0 2 strokes worse when tiger woods participates relative to when woods is absent the overall tournament effect is 0 8 strokes the adverse superstar effect varies with the quality of woods s play there is no evidence that reduced performance is attributable to media attention intensity or risky strategy adoption

the incentive effects of tournaments revisited evidence from the european pga tour this analysis of data from the 1987 european men s professional golf association pga tour strongly supports the hypothesis that the level and structure of prizes in pga tournaments influence players performance specifically players 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 s pga tour may have implications for the design of compensation systems for certain groups of workers such as corporate executives college professors and salespeople

the survival of international new ventures international new ventures invs are a popular mode of entry into foreign markets invs those companies that enter foreign markets at inception often suffer the two liabilities of newness and foreignness which may increase the odds of their failure this paper empirically examines the survival of invs by comparing them with other sequential modes of international operations e g acquisitions data from 275 british firms show that invs have lower unconditional survival probabilities than other modes of foreign market entry our analyses also show that differences in survival probabilities disappear when the firms competitive strategies are considered

the optimal timing of a foreign direct investment analyses of the optimal timing of foreign direct investment fdi decisions have been curiously lacking in the general literature on multinational enterprises cf buckley 1979a b although comparative static analyses exist comparing exporting to the host country with market servicing from a production unit sited in the host country horst 1971 hirsh 1976 the only attempt to predict the timing of the switch from exporting to foreign based production is that of aliber 1970 although vernon 1966 gives a cost based rationale for the switch this chapter attempts to fill this gap in the theory of fdi section 2 1 outlines and criticises previous attempts to deal with the problem sections 2 2 4 present a simple model which ignores set up costs and sections 2 5 and 2 6 give a more detailed analysis including such costs further extensions of the theory are considered in section 2 7 and the conclusions are summarised in section 2 8 the problem emerges as being more complex than had previously been appreciated

tournaments without prizes evidence from personnel records we use a quasi experimental research design to study the effect of giving workers feedback on their relative performance the setting is a firm in which workers are paid piece rates and where for exogenous reasons management begins to reveal to workers their relative position in the distribution of pay and productivity we find that merely providing this information leads to a large and long lasting increase in productivity that is costless to the firm our findings are consistent with the interpretation that workers incipient concerns about their relative standing are activated by information about how they are performing relative to others this paper was accepted by olav sorenson organizations

taxing the multinational enterprise on the forced redesign of global value chains and other inefficiencies the taxation of the multinational enterprise mne has been a continuing concern for policymakers we argue that the changing nature of the mobile mne e g its improved ability to fine slice the value chain and disperse it geographically makes it increasingly important to rethink current tax policies first there should be more focus on the inefficiencies that arise when taxation leads to the inefficient location of mne activities thus mnes may shift activities to low tax jurisdictions that offer lucrative pecuniary and non pecuniary incentives but do not enable their investments to maximize their contribution to global value creation second international tax regimes should ensure that mnes pay for their consumption of local public goods and public finance scholars have long known that the taxation based distortions are minimized when the tax objects are immobile however the bulk of current tax policies are aimed at corporate profits that are both poor proxies for the consumption of local public goods as well as extremely mobile integrating theory from international business public finance and economic geography our analysis demonstrates that moving the incidence of taxation from corporate profits to dividends and consumption would unambiguously improve both wealth creation and efficiency

the role of duration in multinational investment strategies the location of investment by multinational enterprises has been investigated from many perspectives it has been suggested that investment may be motivated by experience of a particular location represented by tenure of operations in contrast portfolio considerations suggest that increased investment in a given location increases risk exposure in this paper the question of whether a multinational with a longer duration of operations at a particular location is more likely to invest further is addressed after taking portfolio risk into account a conceptual model of multinational investment strategy is developed and empirically tested using data from a survey of multinational enterprises operating in the west midlands region of the united kingdom two innovative non parametric tests for duration dependence are applied after normalising for portfolio considerations it is found that multinational investment is significantly duration dependent i e firms with a longer tenure of operations are significantly more likely to invest in any given period this finding has important implications for the strategy of inward investment agencies in particular an investment agency is short sighted if it seeks to attract new investors if that is at the expense of neglecting multinationals with current operations in its jurisdiction

core or periphery the effects of country of origin agglomerations on the within country expansion of mnes we show how the initial subnational entry location of foreign multinational enterprises mnes in china influences their subsequent within country location choices and expansion speed we distinguish between mnes that establish their first subsidiary in co ethnic cores dense agglomerations of other firms from the same country of origin and mnes that locate their first subsidiary in the periphery i e outside of these co ethnic cores to identify co ethnic cores in china we employ a geo visualization methodology which draws the boundaries of cores organically and dynamically over time we contrast our findings with the prevailing approach of using static administrative boundaries for identifying agglomerations our results provide evidence of path dependency in that a entry through subnational locations with strong co ethnic communities is followed by expansion into other locations where co ethnic communities are present and that b entry through co ethnic communities accelerates the pace at which mnes establish additional subsidiaries in china we also find that co ethnic community effects continue to influence within country mne activities over time despite a host of economic institutional and investment developments

how multinational subsidiary mandates are gained and lost a subsidiary mandate is a business or element of a business in which the subsidiary participates and for which it has responsibilities beyond its national market this research studied thirty one mandates in six canadian subsidiaries of u s owned multinational corporations a life cycle framework was proposed and used to explore the factors associated with the gain development and loss of mandates by subsidiaries two key findings emerged first it was shown that there is a risk in having a full scope world product mandate because it is possible to become marginal to the corporate strategy second it was observed that the engine of subsidiary growth is its distinctive capabilities and that for a mandate to be effective it must be built on those capabilities implications for mandate sustainability are proposed on the basis of these two insights

pay equality and industrial politics personnel managers often argue that equitable pay treatment manifested as wage compression is useful because it reduces disharmony among workers but it is far from obvious that a compressed salary structure is morale improving since better workers may feel disenchanted by this scheme however when workers rewards are based on relative comparisons salary compression reduces uncooperative behavior that is detrimental to the firm relative comparisons imply that some reference group must be selected the major result is that within the relevant groups some wage compression is efficient

implementing global strategy characteristics of global subsidiary mandates implementing a global strategy requires coordinating subsidiary activities across country locations the assumption often made is that such coordination must be managed at headquarters however an alternate approach is decentralized centralized responsibilities in which different subsidiaries within the multinational are given worldwide mandates to manage specific products or products lines this study identifies subsidiary characteristics that are associated with receiving a global mandate by examining foreign subsidiaries located in france germany japan u k u s and canada

oligopsony power asset specificity and hold up evidence from the broiler industry in this article we look for empirical evidence of hold up in broiler industry production contracts by using the cross sectional national survey of broiler growers first we focus on the problem of under investment and hypothesize that the degree of agent s grower s under investment systematically depends on the principal s integrator s market power and the level of asset specificity second we provide an indirect test of hold up by looking at the grower contract payoffs as a function of the frequency of the housing facilities upgrade requests and the principal s market power the results show moderate empirical support for the presence of hold up

classic promotion tournaments versus market based tournaments as initially formulated in the seminal analysis of lazear and rosen 1981 an important perspective for understanding the role of promotions in firms is the tournament perspective that is a promotion and in particular the wage increase associated with a promotion is a prize that serves as an incentive for workers to exert effort and take other actions beneficial to the firm such as the accumulation of human capital in this paper i consider whether the best way to model promotion tournaments is by having firms commit to prizes ex ante as in lazear and rosen s initial formulation or whether promotion prizes should be modeled as arising from the signaling role of promotions and the competition between firms for promoted workers

the future of personnel economics personnel economics is defined as the application of microeconomic principles to human resources issues that are of concern to most businesses the field now about 20 years old arose for three reasons first those of us who were teaching standard labour economics to business students encountered a disinterested audience business students believe that labour supply and demand unemployment investment in education and other topics which are of primary concern to labour economists are almost irrelevant to their future business careers their boredom with what we had to sell signalled that a change in the product might be warranted second the issues studied by human resources specialists were of interest to economists but the approach taken by the non economist was unsatisfying it was loose unfocused and ad hoc and lacked the general rigorous framework to which economists have grown accustomed the economist s reaction was to enter an industry where it was believed rents existed third the technology of economics changed as a result of some breakthroughs particularly those dealing with agency and contract theory economists were better equipped to tackle problems that had evaded them in the past

an opposing responses test of classic versus market based promotion tournaments we use a systems based econometric method to show that classic and market based tournament models are empirically distinguishable since the role of risk differs across these models implementing the method using a large finnish worker firm matched panel we find support for classic tournaments given that promotions depend on relative performance the firm s wage structure is convex promotion probabilities are decreasing in the number of competitors performance is increasing in the wage spread and workers and firms adjust their choice variables in opposite directions when the variance of the stochastic component of worker performance changes

is knowledge power knowledge flows subsidiary power and rent seeking within mncs in recent years as multinational corporation mnc subsidiaries have become more closely linked to international networks their knowledge intensity has risen and some of their r d has gained a more creative role simultaneously and often connectedly many subsidiaries have acquired considerable strategic independence in all aspects of their operations and therefore are able to exercise considerable intra firm bargaining power to influence the distribution of the firm s resources in this context we suggest that intra mnc knowledge flows are a key determinant of subsidiary bargaining power we argue that subsidiary managers can exploit such power to pursue their own ends such rent seeking behavior is implicit in much of the literature on managerialism but our analysis suggests that such behavior can now occur in headquarters subsidiary and subsidiary subsidiary relations thus subsidiary strategic independence designed to enhance the competitiveness of outputs market knowledge and inputs asset seeking and learning can be corroded when the pursuit of subsidiary objectives encourages rent seeking empirical analysis of a sample of high technology subsidiaries in the uk provides strong support for the theory we examine several avenues whereby the incentives of units within the mnc can be aligned

do managers behave the way theory suggests a choice theoretic examination of foreign direct investment location decision making many empirical examinations of foreign direct investment location choice have relied on the use of secondary data and surveys on the choices made by firms about the form and location of overseas investment these studies have two inherent and related problems first they rely solely on the location choices made by different firms and assume that the domains of possible options considered were the same second there is an assumption about the rules used by firms to make these decisions yet the decisions are made by boundedly rational managers after reviewing the literature this study examines managers choices about foreign investment location through the use of structured experimentation the results show that in creating sets of investments to consider managers appear to follow fairly rational rules however the choice of actual investments appears less aligned to traditional models

performance responses to competition across skill levels in rank order tournaments field evidence and implications for tournament design tournaments are widely used in the economy to organize production and innovation we study individual data on 2775 contestants in 755 software algorithm development contests with random assignment the performance response to added contestants varies nonmonotonically across contestants of different abilities precisely conforming to theoretical predictions most participants respond negatively whereas the highest skilled contestants respond positively in counterfactual simulations we interpret a number of tournament design policies number of competitors prize allocation and structure number of divisions open entry and assess their effectiveness in shaping optimal tournament outcomes for a designer

men women and competition an experimental test of behavior this study reports a series of experiments that examine outcomes when agents are able to choose between a payment scheme that rewards based on absolute performance i e piece rate and a scheme that rewards based on relative performance i e a tournament we test for the presence and persistence of gender differences in performance and the rate of entry into the tournament option and whether these differences are sensitive to the structure of the tournament rewards in the winner take all wta condition only the best performer in the tournament for each round received a payment 4 50 in the graduated tournament condition the same payment 4 50 was divided among the first second and third finishers in the tournament in the wta condition men showed significantly lower forecast errors than women in addition a clear sorting effect occurs in the wta condition in early rounds of the wta condition male entrants into the tournament show significantly lower forecast errors than female tournament entrants however the difference disappears over time after controlling for forecasting skill gender did not predict entry into the tournament for the wta condition however lower forecasting skill reduced the probability of entry in the graduated tournament the situation was reversed men entered the tournament at significantly higher rates even after controlling for skill forecasting skill had no impact on the decision to enter the tournament while the average male entrant to the tournament had lower forecast errors than the average female entrant the men entered at much higher rates as a consequence men were much more likely than women to enter the tournament too frequently

real options in multinational corporations organizational challenges and risk implications in this study we investigate how multinationality affects firms risk levels our investigation builds on the idea from real options theory that international operations offer switching options to multinational corporations yet we also emphasize different sources of coordination costs that can mitigate the benefits of operational flexibility the findings from tobit models accounting for self selection underscore the importance of unobserved heterogeneity in the relationships between international investments and risk levels consistent with the coordination costs surrounding international operations we find that the relationship between multinationality and downside risk is curvilinear risk first declines and then increases as a firm s portfolio of international investments becomes extensive in addition downside risk is an increasing function of the average cultural distance between a firm s home base and the host countries in which its foreign subsidiaries operate

sequencing the expansion of geographic scope and foreign operations by born global firms born global firms are not actually born global but rather internationalize rapidly from their inception by expanding their geographic scope and extent of foreign operations however it remains unclear whether such firms 1 simultaneously expand along both dimensions 2 focus on expanding along a single dimension at a given time and switch interchangeably between expanding geographic scope and extent of foreign operations in subsequent periods or 3 stick solely to a specific internationalization path over several subsequent periods this study theorizes and empirically demonstrates that born global firms stick to a dominant internationalization path over subsequent periods arguably this phenomenon reflects managerial efforts to reduce the perceived risk of internationalization and their preference to develop and leverage capabilities that are specific to either of the internationalization paths until the economies of further expanding this path are exhausted

mnes and industrial structure in host countries a portfolio analysis of irish manufacturing ireland has been very successful in attracting foreign mnes in high technology sectors although these sectors exhibit faster growth than the traditional low technology sectors populated primarily by indigenous firms the high technology sectors are also more volatile we use portfolio theory to show that ireland s fdi strategy has led to a more diversified manufacturing sector that exhibits higher growth without a commensurate increase in volatility and risk

structural estimation of rank order tournament games with private information in this article we propose and solve a game theoretic model of a rank order tournament with private information using the contract settlement data from a poultry company we estimate a fully structural model of a symmetric nash equilibrium of this game we show that growers equilibrium effort depends on four factors the spread in piece rates between the performance brackets the number of players in each tournament the number of performance brackets used and the density of growers private shocks we use estimates to simulate how changes in the tournament characteristics affecting equilibrium effort impact the growers and the integrator s welfare in most sporting events prizes are awarded not on basis of absolute performance but based on relative performance or tournaments be sides sporting events tournaments are also frequently used in labor contracts the name tournament typically suggests a rank order ordinal scheme such as is considered by lazear and rosen 1981 whereas a broader definition applies to any compensation scheme based on relative performance e g nalebuff and stiglitz 1983 tsoulouhas and vukina 1999 despite the sizeable theoretical litera ture on tournaments empirical work related to these models remains rather limited most of the theoretical literature on tournaments see mclaughlin 1988 for a survey has been con cerned primarily with the comparison of tour naments against various independent reward structures under various assumptions about risk preferences the number of participants and prizes specifications of production shocks and the asymmetry of information previous empirical work has largely focused on testing the predictions of the theoretical models this includes articles on executive compensation e g main o reilly and wade 1993 ericksson 1999 gibbons and murphy 1990 profes sional sports e g ehrenberg and bognanno