Personnel Economics Application Paper
Tournament is a kind of reward system where fixed rewards are used for a fixed group of people and the “distribution of rewards is based on the order of the participants’ performance” (Lazear & Oyer, 2009, p. 9). In this particular situation, four agents in one of Mitch & Murray’s offices are given a strong incentive to succeed in a sales tournament. Mitch & Murray uses a set of prizes that diminish in value as a person’s relative performance gets lower. The top seller will win himself a Cadillac, the second will win himself a set of steak knives, and the others will be out of job (Glengarry Glen Ross, n.d.). In response to the given prizes, four agents react in different ways. For Ricky Roma, the only salesman making good sales recently, his response to the sales tournament is to secure his current position as the top seller by getting a great deal done. The fancy first prize does provide an incentive for him to work harder and more efficiently, but it does not stimulate him to exert much more effort because there are only 4 people involved in the competition and Ricky is already the current top seller whose sales performance far exceeds the others. His big chance to win the tournament motivates him to get Mr. Lingk’s deal done efficiently. When he comes back to the office the next morning, he is so excited because this deal is big enough to win him the first prize. Tournament theory also explains why he is so eager to fix the problem when Mr. Lingk’s deal goes wrong, because otherwise, he has to exert extra effort on other deals that can guarantee him the position as the top performer. Shelley Levene is the employee struggling on the edge of unemployment. He has a huge financial burden since her daughter is severely sick. It is not the first prize, the fancy Cadillac, that motivates him to work hard, but the threat of being fired with no income. He starts to work right after the office meeting which proves...
References: Lazear, E. P. and Oyer, P. (2009, July). Personnel Economics. Retrieved from http://faculty-gsb.stanford.edu/oyer/wp/handbook.pdf [accessed November 25, 2012]
Glengarry Glen Ross. (n.d.). Retrieved from http://www.imdb.com/title/tt0104348/ [accessed November 25, 2012]
Homo economicus. (n.d.). Retrieved November 25th, 2012, from http://en.wikipedia.org/wiki/Homo_economicus [accessed November 25, 2012]
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