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A Theoretical And Experimental Investigation Of Efficiency, Equity, And Uncertainty In Tournaments, Nicholas Busko

Doctoral Dissertations

This dissertation consists of three essays centered around labor incentives that arise in relative compensation contracts. Chapter 1 poses the question: if devotion to a core competence were truly optimal, why would firms do otherwise? We argue that the behavior of drifting from the core may be motivated by the competitive incentives faced by managers who seek to rise within a firm. We find competition creates an incentive for a manager to look for less correlated opportunities that pull the firm in a new direction. In a symmetric equilibrium all managers behave this way, leading to lower expected output for …