published in: Journal of Institutional and Theoretical Economics, 2005, 161 (4), 636-663
Tournament incentive schemes offer payments dependent on relative performance and
thereby are intended to motivate agents to exert productive effort. Unfortunately, however, an
agent may also be tempted to destroy the production of his competitors in order to improve
the own relative position. In the present study we investigate whether this sabotage problem
is mitigated in a repeated interaction between the agents and the principal. As sabotage can
hardly be observed in real-world organizations we employ a controlled experiment. Our data
provide clear evidence that agents’ behavior is not only guided by competition between
agents but also by the possibility to punish the principal via sabotage.
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