Relative deprivation in rank-order tournaments

This paper examines the influence of relative deprivation (RD), based on net income, on the strategy choice of workers in tournaments. The results show that for given tournament prizes, workers who experience RD exert more effort than workers who maximize their expected absolute incomes. These findings hold for productive effort as well as for counterproductive effort (sabotage). In addition, the paper discusses various implications that arise when the employer can choose between different compensation schemes in the tournament. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: C72; J31; J33; J41.