Matthias Kräkel, Oliver Gürtler
Dismissal Tournaments
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- 10.1628/093245612804469827
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We consider a dismissal tournament where the loser gets fired. Although the firm takes possible selection failures into account when choosing the optimal tournament design, the selection efficiency of a dismissal tournament is often rather low. This is because low-ability workers, possessing relatively poor outside options, have strong incentives to secure their jobs.