Ingmar Nyman, Jason G. Cummins
Yes Men in Tournaments
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- 10.1628/093245613X13806312325779
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We study a rank-order tournament in which employees acquire and use private information for an investment decision. In this environment, competition can turn employees into yes men who make investment decisions that excessively agree with preconceived notions. The specter of yes-man behavior may drive the tournament incentive intensity and the employees' information-collection effort either to zero or above the first-best efficient levels. We also show that yes-man problems are alleviated by a stronger correlation between the employees' sources of uncertainty and by the use of individual compensation contracts rather than a tournament.