Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 20, 2016 erstellt
Description:
This paper examines "market-based tournaments", in which firms use the tournament outcome to update their expectations about worker ability. A theoretical model offers several implications, which are unique to the market-based tournament and which we test in a laboratory experiment. The experiment supports most of the implications: We find that an increase in the variance of worker ability leads to a higher wage spread and that there is a non-monotonic relationship between this variance and effort. An increase in the marginal product of ability increases effort. Finally, the wage spread depends on labor market thickness