Rank-Order Tournaments as Optimum Labor Contracts

Volume: 89, Issue: 5, Pages: 841 - 864
Published: Oct 1, 1981
Abstract
This paper analyzes compensation schemes which pay according to an individual's ordinal rank in an organization rather than his output level. When workers are risk neutral, it is shown that wages based upon rank induce the same efficient allocation of resources as an incentive reward scheme based on individual output levels. Under some circumstances, risk-averse workers actually prefer to be paid on the basis of rank. In addition, if workers are...
Paper Details
Title
Rank-Order Tournaments as Optimum Labor Contracts
Published Date
Oct 1, 1981
Volume
89
Issue
5
Pages
841 - 864
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