Akerlof, Robert; Holden, Richard - In: Economic Theory 51 (2012) 2, pp. 289-313
This paper characterizes the optimal way for a principal to structure a rank-order tournament in a moral hazard setting (as in Lazear and Rosen in J Polit Econ 89:841–864, 1981). We find that it is often optimal to give rewards to top performers that are smaller in magnitude than corresponding...