A Marathon, a Series of Sprints, or Both? An Analysis of Tournament Horizon in Multi-Period Settings

• In Event: Tournament Incentives in Multi-Period Settings

Abstract

When motivating employees via a tournament in multi-period settings, firms can use a single tournament (a grand tournament), a sequence of multiple tournaments each with a shorter horizon than a grand tournament (a repeated tournament), or a combination of both in which a repeated tournament is embedded within a grand tournament (a combo tournament). Using an experiment, we investigate whether the effect of tournament horizon on performance depends on the presence of internalities, in which current period actions affect outcomes in both the current and future periods. We find that when internalities are absent, performance is greatest in the combo tournament, followed by the repeated and then the grand tournament. In contrast, we find that when internalities are present, performance is greatest in the repeated tournament, followed by the grand and combo tournaments, with similar performance in the latter two tournaments. Our results provide insights into the use of tournaments in multi-period settings. Moreover, the moderating effects of internalities we observe in our experiment reinforce the need to align the incentive compensation with the task.

Authors

• Willie Choi, University of Pittsburgh

• Andrew H Newman, University of South Carolina

• Ivo D Tafkov, Georgia State University