The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd


  • Tor Eriksson
Reference work entry


Tournament theory is a theory of promotion-based incentives which also contributes to the understanding of firms’ wage structures and individual earnings. In tournaments wage-rank differentials act as an incentive scheme when firms cannot directly observe employees’ effort. Empirical evidence is mainly from sports and lab experiments while there are fewer studies of businesses and organizations.


Pay Promotions Raises Relative performance Wage structures 

JEL Classifications

M51 J31 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Tor Eriksson
    • 1
  1. 1.