Petra Nieken

Information Policy in Tournaments with Sabotage

Sabotage is one of the main problems of tournament-like reward schemes. Workers who are leading in a tournament are more dangerous rivals, and are therefore sabotaged more heavily. This implies that there is an extra cost to becoming a leader and, hence, to choosing high productive effort in the early stages of a tournament. The incentives to exert productive effort are thereby reduced. We show that this problem can be solved by concealing intermediate information on the performances of workers (i.e., by clever information management). Moreover, we offer experimental evidence indicating that such information management does increase productive efforts.

On the Choice of Risk and Effort in Tournaments - Experimental Evidence

We investigate a simple two-person tournament in a controlled laboratory experiment. Each player chooses between two distributions of random shocks. After observing the overall risk, both players decide simultaneously on their effort. Theory predicts both players should choose the distribution with the higher variance of random shock, as this minimizes equilibrium effort. We show that the effort exerted is sensitive towards risk. The agents exert less effort if the random shock is high. However, agents do not learn to commit themselves by choosing a high risk in our experiment.

Heterogeneous Contestants and the Intensity of Tournaments

We empirically investigate whether tournaments between heterogeneous contestants are less intense. To test our hypotheses, we use professional sports data from the TOYOTA Handball-Bundesliga, the major handball league in Germany. Based on sports betting odds, we estimate the differences in winning probabilities of the competing teams and find evidence for a negative impact of the matchup’s heterogeneity on the intensity of the game. The decrease is significant not only at the beginning but also toward the end of the game. Further analysis shows that the overall intensity decrease is almost entirely driven by the reaction of the ex ante favorite team.

Management Changes, Reputation, and “Big Bath”—Earnings Management

We study the effects of managerial turnover on earnings management activities in a model in which managers care about their external reputation. We develop an overlapping generations model showing that both outgoing and incoming managers bias reported earnings such that typically very low returns are reported in the first period after a manager has been replaced. Outgoing managers shift earnings forward to their last period in office as they will not benefit from earnings realized after that. Incoming managers can have an incentive to shift earnings to the second period in office as reported earnings will, immediately after a management change, only be partly attributed to their own ability. Deferred compensation can reduce incentives for earnings management.

Repeated Moral Hazard and Contracts with Memory: A Laboratory Experiment

This paper reports data from a laboratory experiment on two-period moral hazard problems. The findings corroborate the contract-theoretic insight that even though the periods are technologically unrelated, due to incentive considerations principals may prefer to offer contracts with memory.

If You Can Play, You Get the Pay!? A Survey on Salary Discrimination in the NHL

The chapter reviews studies investigating salary discrimination in the National Hockey League. The vast majority of studies concentrate on potential discrimination of French-Canadian players compared to English-Canadian players with some also taking salary differences between US and European players into account. The findings presented in the available studies differ considerably and are, therefore, difficult to reconcile. There is limited evidence for salary discrimination of French-Canadian players playing for English-Canadian teams. While some studies do find support for salary discrimination, others fail to find statistically significant salary differences that can be attributed to a player’s ethnicity.

Heterogeneous Contestants and Effort Provision in Tournaments - an Empirical Investigation with Professional Sports Data

We empirically investigate if tournaments between heterogeneous contestants are less intense. To test our hypotheses we use professional sports data from the TOYOTA Handball-Bundesliga, the major handball league in Germany. Using either differences in betting odds or rankings to measure ability differences, our results support standard tournament theory as we find a highly significant negative impact of the matchups heterogeneity on joint teame efforts. However, further analysis shows that this overall decrease in efforts is almost entirely driven by the reaction of the ex-ante favorite team.