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“Yes-Men in Tournaments

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Abstract
We study a rank-order tournament in which employees acquire and use private information for an investment decision. In this environment, competition for promotion can turn employees into "yes men" who make investment decisions that excessively agree with their supervisor's preconceived notions. Employees become "yes men" when their supervisor's prior opinion is strong and the parties receive little subsequent information. In response to this inefficiency, the firm may intensify the tournament's incentives (e.g., increase the wage raise from promotion), increase the correlation of employees' information (e.g., use tournaments for employees handling similar tasks), reduce the importance of any individual supervisor's prior opinion (e.g., evaluate employees using a committee), or use a different incentive mechanism altogether (e.g., individual contracts).

Suggested Citation

  • Ingmar Nyman & Jason G. Cummins, 2007. "“Yes-Men in Tournaments," Economics Working Paper Archive at Hunter College 417, Hunter College Department of Economics.
    • Handle: RePEc:htr:hcecon:417
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    File URL: http://econ.hunter.cuny.edu/wp-content/uploads/sites/6/RePEc/papers/HunterEconWP417.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Soraperra, Ivan & van der Weele, Joël & Villeval, Marie Claire & Shalvi, Shaul, 2023. "The social construction of ignorance: Experimental evidence," Games and Economic Behavior, Elsevier, vol. 138(C), pages 197-213.
    2. Ivan Soraperra & Joël van der Weele & Marie Claire Villeval & Shaul Shalvi, 2022. "The Social Construction of Ignorance: Experimental Evidence," Post-Print hal-03907198, HAL.
    3. Abhinav Sacheti & Ian Gregory-Smith & David Paton, 2016. "Managerial Decision Making Under Uncertainty," Journal of Sports Economics, , vol. 17(1), pages 44-63, January.
    4. Shaul Shalvi & Ivan Soraperra & Joël van der Weele & Marie Claire Villeval, 2019. "Shooting the Messenger? Supply and Demand in Markets for Willful Ignorance," Tinbergen Institute Discussion Papers 19-071/I, Tinbergen Institute.
    5. Hagmann, David & Feiler, Daniel, 2020. "The Agent-Selection Dilemma in Distributive Bargaining," OSF Preprints y6tq2, Center for Open Science.

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    More about this item

    Keywords

    Tournaments; Information Aggregation; Conformity;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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