|
Abstract:
|
The way in which agents manipulate the distribution of performance outcomes in
strategic settings has received increasing attention in the game theory literature. This
paper uses an evolutionary approach to examine the optimal adaptation of strategic variability
in corporate promotion tournaments. The model describes a situation in which
agents are promoted to a higher salary based on observable performance, which depends
stochastically on effort. Simulation results show that the optimal adaptation of risk-taking
is highly dependent on the population mix. However, strategies that involve adapting risk
early in the tournament are almost never part of an evolutionarily stable state, particularly
when using uniform initial conditions. Results also show how managers can choose
rank-order payoff schemes and tournament lengths to optimize with respect to risk-taking
and effort. |