Q. How disparate are returns if you win? As disparity increases => marginal benefit increases. Problems to be solved Participants have an incentive to sabotage rivals => reduce productivity. How do you treat losers? Why do Earnings Rise with Job Tenure? What does human capital theory say? Hint: increased productivity increases wages. How about delayed compensation plans that we discussed above? Which of these two explanations is correct? When we know workers are investing in human capital => do wages rise?