U-Type versus J-Type Tournaments

In practice, two types of tournaments can be distinguished – U-type and J-type tournaments. In U-type tournaments, workers receive prizes that have been fixed in advance. In J-type tournaments, the employer fixes an aggregate wage bill in advance, which is then shared among the workers according to their relative performance. The results of the paper show that the outcomes of the two tournament types differ substantially. In particular, an employer will prefer J-type to U-type tournaments if the number of workers is large, but the opposite if it is small.