TESTING THE THEORY OF TOURNAMENTS - AN EMPIRICAL-ANALYSIS OF BROILER PRODUCTION

Broiler chickens are raised by contract growers whose rewards depend e xplicitly upon relative performance. We use data on the performance of broiler producers facing both tournament and linear performance evalu ation compensation structures to test three predictions from the theor y of tournaments: that changes in the level of prizes that leave prize differentials unchanged will not affect performance; that, in mixed t ournaments, more able players will choose less risky strategies; and t hat tournament organizers will attempt to handicap players of unequal ability or reduce mixing to avoid the disincentive effects of mixed to urnaments. Our evidence is consistent with each prediction.