Searching for the Best? Clubs and their admission decisions

Pia Luenstroth
University of Trier, Germany

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     Last modified: December 1, 2010
     Presentation date: 03/12/2011 9:00 AM in NH 1140, Session C
     (View Schedule)

Abstract
One of the main issues of the professor's remuneration reform at German
universities is the introduction of a performance-dependent salary. This paper
applies relative rank order tournaments to special performance benefits
at university level and looks at the interaction with faculty appointment decisions.
Faculties face a trade-off when hiring new professors: On the one
hand, hiring a good professor will increase the overall reputation of the faculty
and members will benefit from spill-over effects in joint research. On
the other hand, the new professor will be an opponent in future tournaments
for special performance benefits. The incumbents fear a relative deprivation
of their salary. Therefore, they ensure their own position within these tournaments
by choosing an inferior competitor. This trade-off is modeled as a
two-stage game in the context of clubs and their entrance-decisions.