Abstract:
We study a model of competition among coworkers within a firm, where workers compete for a wage bonus assigned to only a fraction of them on the basis of the level of costly effort they choose to exercise. We analyze it from a learning in games perspective, under both fictitious play and reinforcement learning. The main result we find is an inverted-u shaped relationship between the average level of effort provided by workers and the fraction of them receiving the bonus, with a maximum reached when more than half workers are given such bonus.
