Deprivation in heterogeneous organizations

We present a model of rivalry in an organization consisting of a single authority and N subordinates. A number Nh of subordinates are highly able whereas the rest, Nt=N—Nh, are less able. This information is common knowledge among the subordinates. The authority organizes a contest in which n (≤ N) promotion opportunities or rewards of value B each are offered. Each member decides whether to participate in the contest to obtain a reward. Participation requires additional effort above the explicitly contracted effort. This additional effort is lower for the able individuals than for the others (Eh < Et ).

Following Kosaka (1986) and Abell (1996), deprivation is defined as the ratio of contest participants who fail to get promoted to organization size. We show that, as long as Nh/N is not too large, maximal deprivation in organizations with homogeneous (in terms of ability) individuals is larger than in comparable organizations with heterogeneous individuals. Deprivation in the heterogeneous organization exceeds deprivation in the homogeneous organization only for low prize densities n/N. Furthermore, although highly able individuals face better promotion opportunities, their deprivation level is larger than that of the less able.

Notes

I would like to thank Kenji Kosaka and Peter Abell for helpful suggestions and comments.