Abstract
Punishment is incorporated into Gürtler and Münster (2010) two-round three-player tournament with both productive and sabotage effort by allowing the organizer to punish only one saboteur and only in one round. Two efficiency criteria are considered and it is found that even if in round 1 the organizer could punish more than one player, she should still choose to punish in round 2. This suggests that a principal with limited authority should be patient and ignore sabotage when carried out by workers in the early stages of their career but punish them if they are close to promotion.
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