Tournament theory is based on the proposition that

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Tournament theory is based on the idea that it is the spread between the top and the next highest salary that matters, rather than absolute or relative performance or a linear relationship between pay and organizational level. The theory suggests that employees are motivated to compete for a top position and will work harder to achieve it if there is a significant difference in pay between that position and the next highest level. This can result in greater productivity and performance from employees. Internal labor markets with promotion from within is not an alternative approach to tournament theory, but rather a related concept that can be applied in conjunction with it.

Tournament Theory Is Based on the Proposition That