Behavioral And Welfare Effects Of Tournament Contracts And Fixed Performance Contracts With Heterogeneous Agents: An Experimental Study

In 2005, the regulation of agricultural production contracts has been a topic of debate in recent policy discussions at both the state and federal levels. These debates emerged from widespread grower discontent about the fairness of agricultural contracts and have led to legislative proposals designed to regulate agricultural contracts. The agricultural contracts are the use of relative performance contracts, which condition growers'payments on the performance of other growers through rank order tournament. However, some scholars regard the "promotion tournament" mode of the Chinese local officials around the GDP growth is a most important reason for China miraculous growth. Why taking the same tournament mechanism, the effect is different. Many researchers around the world verify whether tournament mechanism can be used as an effective incentive strategy through empirical and experimental studies. Many scholars hold positive attitude to tournament. Taking into account the potential collusion,sabotage,or other forms of non-cooperative behavior are likely to affect the incentive effects of tournament, whether the tournament mechanism can be used as an effective strategy is not determined?This thesis,under the analysis frame of tournament,intends to conduct an experimental study to test behavioral and welfare effects of tournament contracts and fixed performance contracts with heterogeneous agents. We intend to conduct uneven experiments which are closer to reality. Different from other experiments, external influence include common shock and idiosyncratic shock in this article .By designing 7 experiments, we analyze behavioral and welfare effects of tournament contracts and fixed performance contracts,endogenous versus exogenous allocation of prizes mechanism. We try to solve three problems. Firstly, with the same external influence, which contract can motivate agent's effort? Secondly, under different common shock and idiosyncratic shock ,what is the impact of behavioral and welfare effects for agents. Finally, what is the impact of behavioral and welfare effects for agents in endogenous versus exogenous allocation of prizes mechanism?The main conclusions of this paper can be indicated that:(1)the efforts of all subjects,low-cost subjects,high-cost subjects are higher than theoretical value in tournament contracts experiments, but this caused decrease of their average revenue. High ability subjects are more hurt than low ability subjects.(2)the efforts of all subjects,low-cost subjects,high-cost subjects are inconsistent of theoretical value in fixed performance contracts experiments, but their average revenue correspond with the theoretical value.(3)we find that tournament contracts has a positive impact (relative to fixed performance contracts) on the efforts and a negative impact on the earning of all subjects and high ability subjects when idiosyncratic shocks dominate. There is not the same result when common shock dominate. Low ability agents are beneficial on the earning of fixed performance contracts. (4)we find that endogenous allocation of prizes mechanism has a negative impact(relative to exogenous allocation of prizes mechanism )on the efforts and a positive impact on the earning of high ability agents and low ability agents.In conclusion,for enterprises,carrying out of tournament contracts can not only raise the employees'total yield but also decrease the transaction cost that enterprises spend carrying out these policies so as to enormously increase their revenues. Therefore, tournament contracts is an ideal contract for employer. During implementation process, employer should make sure the ability of participates must be fair and take measures to prevent sabotage behavior. Implementing exogenous allocation of prizes mechanism is better than endogenous allocation of prizes mechanism in Self-Administrant Team. During authorizing to Self-Administrant Team, employer should notice that autonomy is mainly on the objects and tasks of self-decision and self-management, but not on the allocation of prizes.