Works
- Rank-Order Tournaments as Optimum Labor Contracts, Journal of Political Economy, 1981
- Prizes and Incentives in Elimination Tournaments, American Economic Review, 1986
In Tactics of Organizational Politics
Ideas
Tournament theory. When output is hard to measure precisely, paying people by their rank among competitors can produce efficient effort; prizes are fixed in advance and go to whoever ranks highest. Effort depends on the size of the gap between the winner's prize and the others, so large rewards for a top position can be efficient even when the winner is only slightly better than the runner-up.
Elimination tournaments. In a career ladder where contestants are eliminated round by round, extra weight must be placed on the top prize to keep survivors working hard at every stage. This helps explain why the rewards for the very top positions are so much larger than those one step below.
What it explains
Rosen and Lazear explain why a contest for a single prize, such as a promotion or succession, can extract a great deal of effort from every contender, including those who lose. Rosen's later work explains why the prize at the top has to be large to keep the contest going.