Tournament theory, the prize is for everyone else
This is a named principle rather than a measured effect. The logic is sound, and the documented cases keep bearing it out. Trust the direction, and treat the boundaries as open.
Economists puzzled over why chief executives are paid so enormously more than the people just below them, gaps far larger than any difference in their actual output could justify. One influential answer is tournament theory. It argues that the top salary is often less a reward for the value that one person produces than a prize, deliberately set high and dangled in front of everyone in the levels below, to keep them working hard and competing for the chance to win it one day. In this view, the CEO's pay motivates the ambitious vice presidents and managers beneath far more than it reflects the CEO's own contribution, much as the huge prize in a tournament drives all the competitors, not just the eventual winner. The size of the gap is the point, because a bigger prize induces more effort from everyone still climbing toward it.
A large reward at the top of a hierarchy often functions less as fair pay for the person who holds it and more as an incentive aimed at everyone below who is still competing for it. This reframes how you read the big prizes in any organisation. The gap between the top role and the next one down is frequently designed to motivate the people who have not yet reached the top, not to precisely match the value of the person who has. It is worth understanding whether a reward you are chasing, or offering, is calibrated to someone's actual contribution or is really a lure meant to keep a whole field of people striving, because those are very different things wearing the same price tag.
Fifty kronor reduced blood donor sign-ups among women from 52 percent to 30. A chief executive's enormous package is designed to keep everyone below striving for it. Money suppressed the behaviour in one and drives it in the other. What separates them is what the money is competing with. Donating carried a signal about the person, and payment replaced it with a transaction. Competing for the top job carried nothing anyone was protecting, so the prize simply added to whatever was there. Before attaching money to a behaviour, ask whether the behaviour was saying something about the person doing it. If it was, the payment is not an addition, it is a replacement.
Frank and Cook, 1995
On markets where tiny differences in rank produce enormous differences in reward, and what that structure does to everyone still competing below the top.
Draw your own card. It does not take long, and it rewards taking your time.