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Tournaments, Fairness, and Risk
Author(s) -
Wu Steven,
Roe Brian
Publication year - 2006
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2006.00879.x
Subject(s) - tournament , ceteris paribus , economics , willingness to pay , microeconomics , revenue , compensation (psychology) , actuarial science , mathematics , social psychology , psychology , finance , combinatorics
We estimate willingness to pay (WTP) to operate under two types of contracts—tournaments (Ts) and fixed performance‐standard contracts (F). Our results are consistent with the notion that subjects having social preferences for fairness and care about risk. That is, when subjects experience greater inequity under tournaments relative to fixed performance contracts, or experience greater revenue risk under tournaments, the gap between WTP for fixed performance and tournament contracts increases, ceteris paribus . Our results provide an explanation for grower dissatisfaction with tournament compensation schemes independent of possible concerns regarding opportunistic behavior by integrators.