RESEARCH_FILE
Edward P. Lazear
Stanford University Graduate School of Business
Known for:Co-founding rank-order tournament theory with Sherwin Rosen (1981), the foundational economic model for why and how paying by rank motivates effort.
SEE THE PRACTICE
Turn a thought this research explains into one clear move.
THE THOUGHT
“Everyone can see I'm at the bottom of the board”
YOUR RECORDED RESPONSE
“The board shows a month of outcomes, not my worth.”
ONE PRIVATE MOVE
In under 10 minutes, write down today’s rank, one deal you can still influence, and one fact the board does not show; then fold the paper and put it in a drawer or notebook.
Key findings
- 1981
Rank-order tournaments can induce an efficient allocation of effort among risk-neutral workers, comparable to paying strictly by individual output. Rank-Order Tournaments as Optimum Labor Contracts ↗
- 1981
Effort under tournament pay is governed by the spread between the prizes at adjacent ranks, not their average level — widening the gap between one rank and the next increases the incentive to work harder. Rank-Order Tournaments as Optimum Labor Contracts ↗