Abstract

It has been emphasised that tournaments can determine non-cooperative behaviour among workers employed at the same hierarchical level. Instead, less attention it has been attributed to the analysis of co-operation between superiors and subordinates. The traditional view says that cooperation of subordinates with their superior should not be a problem as the latter decides on promotions. The problem emphasised in the paper regards the fact that supervisors may not want to promote the best workers from under them because their smart subordinate then becomes their competition. In this paper we propose a tournament which, thanks to a system of linked promotions, manages to obtain the cooperation of employees at different levels in the hierarchy. The success of the system (effort and cooperation by subordinates) depends on the superior's abilities and thus on his chances of promotion. If the probability is high (low), it will be in the interests of subordinates to offer cooperation to their superior even (only) if the spread is not (is) very high. In an extreme case where the probability of promotion is equal to zero subordinates will not be motivated to offer co-operation. Once a basic model has been supplied and the main results identified, an extension is attempted by considering the possibility of the removal of the superior by workers from within or outside the company. Finally a preliminary analysis is introduced of the firm's moral hazard problem that emerges in tournaments involving insides and outsiders workers. A reputational mechanism defines the maximum level that spread must respect.