This paper compares relative performance evaluation via tournaments to absolute performance evaluation via piece rates when agents are heterogeneous ex post, to make the point that agent heterogeneity compromises the insurance function of tournaments. In particular, we show that the more...

A celebrated result in the theory of tournaments is that relative performance evaluation (tournaments) is a superior compensation method to absolute performance evaluation (piece rate contracts) when the agents are risk-averse, the principal is risk-neutral or less risk-averse than the agents...

This paper proposes an alternative to standard cardinal tournaments. The analysis contrasts "hybrid" cardinal tournaments to standard cardinal tournaments and piece rates. It shows that providing for partial insurance against common uncertainty via a hybrid tournament (in which the weights on...

This paper compares relative performance evaluation via tournaments to absolute performance evaluation via piece rates when agents are heterogeneous ex post, to make the point that agent heterogeneity compromises the insurance function of tournaments. In particular, we show that the more...

This paper compares relative performance evaluation via tournaments to absolute performance evaluation via piece rates when agents are heterogeneous ex post, to make the point that agent heterogeneity compromises the insurance function of tournaments. In particular, we show that the more...