We analyze a two-stage game between two heterogeneous players. At stage one, common risk is chosen by one of the players. At stage two, both players observe the given level of risk and simultaneously invest in a winner-take-all competition The game is solved theoretically and then tested by...

In practice, two types of tournaments can be distinguished - U-type and J-type tournaments. In U-type tournaments, workers receive prizes that have been fixed in advance. In J-type tournaments, the employer fixes an aggregate wage bill in advance, which is then shared among the workers according...

This paper considers a two-stage game with two owners and two managers. On the first stage, the owners choose a linear combination of profits and sales as incentives for their managers. On the second stage, the two managers compete in a tournament against each other. In a symmetric equilibrium,...

This paper discusses the properties of stylized U.S. (U-type) and Japanese tournaments (J-type), which can both solve the unverifiability problem of labor contracts. Under a zero-profit condition, both tournament types will yield first-best efforts if workers are homogenous and risk neutral....

In an asymmetric tournament model with endogenous risk choice by the agents it is shown that equilibrium efforts decrease (increase) with risk if abilities are sufficiently similar (different). Risk also affects winning probabilities. The interaction of both effects is analyzed.

Rank-order tournaments are usually modeled simultaneously. However, real tournaments are often sequentially. We show that agents' strategic behavior significantly differs in sequential tournaments compared to simultaneous tournaments. In a sequential tournament, under certain conditions the...

This paper discusses the strategic role of mismatching, where players voluntarily form inefficient teams or forego the formation of efficient teams, respectively. Strategic mismatching can be rational when players realize a competitive advantage (e.g. harming other competitors). In addition, the...