Personnel Economics Application Paper

1033 WordsJan 27, 20135 Pages
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…show more content…
The good leads are locked in the office manager's room and they will not be distributed until the end of the contest. (Glengarry Glen Ross, n.d.). After he realizes that no matter how hard he work, his sales performance will barely improve, he becomes desperate. At that point, the cost of effort for him is too high which makes the prize unachievable, and thus provides no incentive for him to exert effort anymore. With those old leads, luck becomes relatively more important to the final success and effort relatively less important. In such case, workers will try less hard to win because effort has a smaller effect on whether or not they win (Lazear & Oyer, 2009, p. 10). This is why he soon gives up working on the old leads but to flatter, threaten, and bribe the office manager to get good leads which can reduce the cost of his effort and diminish the importance of luck. However, the result is quite unexpected – His attempt to get good leads does not work out so he finally helps Dave to steal and sell the good leads to another company. This result may not be explained by tournament theory but can be explained by economic theories – Homo economicus all want to maximize their own profit or utility at the lowest cost (Homo economicus, n.d.). Stealing and selling the leads may be a risky move but the profit it brings to Shelly exceeds the risk plus the profit he may gain from working on the old leads, and that
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