David Shrigley, the Glasgow-based artist in this year's Turner Prize final four, does not believe he, or fellow nominees Laure Prouvost and Lynette Yiadom-Boakye, have a chance of winning the £25,000 top prize.

He thinks Tino Sehgal, the Berlin-based artist who has already won the Golden Lion at this year's Venice Biennale (perhaps that event's top gong), is a shoo-in.

I am not so certain, based purely on this exhibition in Derry. But wiser and better connected heads in the contemporary art world than mine point to the fact that for two years in a row, performance art has been represented in the annual prize, and perhaps, as far as this often contentious award is concerned, its "time has come". Last year Spartacus Chetwynd - who is now, incidentally, called Marvin Gaye Chetwynd - was on the shortlist, losing out to Elizabeth Price.

Sehgal, as he does here, devises work that exist primarily as encounters between people. These "constructed situations" have become increasingly complex, but here it is a very simple one, called This Is Exchange, dating from 2003.

In the former British army barracks at Ebrington, now an excellent state of the art gallery (which, in a baffling turn of events, look set to be turned into offices once the Turner Prize has gone), you enter an empty white room and a gallery assistant approaches you. He then asks for your views on the market economy, in return for a password which, if you repeat it at the gallery's reception, will gain you £2. The debate this reviewer had with the assistant was not particularly enlightening. Perhaps that was my fault. He did not record, or had not been asked to record, the conversation in any way. It left me rather non-plussed, but perhaps a packed and frantic press view is not the best backdrop to a discussion of the ills of global capitalism.

However, the Turner Prize is based on a portfolio of work, not just this exhibition, and Sehgal was shortlisted for This Variation at Documenta (XIII) and These Associations at Tate Modern: both works more complex and nuanced than this.

Prouvost's films and installations are more beguiling than Sehgal's empty room of stilted conversation. In a darkened room, with tea tables, chairs and teapots, Wantee, a film made this year, plays. Her use of these atmospheric surroundings and attendent art works heighten the films' impact.

Absorbing and distracted, Wantee is shot largely in a muddy hovel, a set she built for a fictional grandfather, whom she fashioned as an artist and friend of the German artist Kurt Schwitters, who (in real life) spent his last years in the Lake District.

Wantee is named after Schwitter's girlfriend, who would repeatedly ask him if he wanted tea. Tea cups, pots and tea itself, thus, is ever present, as is a wandering narrative. It is a troubling, quick-cut, strangely beautiful film, with plangent piano heightening the melancholy and sense of disarray, chaos and loss.

In the next room, where you sit on a pink slope, is a lighter, more airy, sparky film called Grandma's Dream, which is less involving but sharp and amusing.

Upstairs, a dark room holds six paintings by Yiadom-Boakye. Her freely painted portraits are, like Prouvost's grandad, fictional but seem very real. In the dark room, the eyes and teeth of her men glare, although even the moustached figure at the centre of Bound Over To Keep The Faith edge towards androgyny. One figure kneels and shoots a gun, another lies, sated, on what could be a beach or waste ground.

Another striking portrait hints of a man wearing a rough or plumed collar in the vigorous brushwork on its dark canvass. They are dream-like, elusive figures, both there and not-there, both in time and out of time - there are few details given to any wider story or setting. The strong faces seem to loom and drift in the gloom like revenants.

Perhaps Shrigley now has his own David. Of course Michelangelo's David does not pee into a metal bucket every now and again, like Shrigley's Life Model (made in 2012). And his physical form is rather more beautiful.

This three metre (10ft) high figure, who also blinks, stands on a plinth in the middle of the white room, whose walls are adorned with the public's drawings of the model. Chalk and paper, chairs and easels are provided. The model's grotesque face will be familiar to viewers of Shrigley's sketches and drawings, and the deadpan comedy in the work is present in his other sculptures.

The childish humour of the peeing is also, perhaps, a comment on the pains undergone by real life models, who can pose for some time in discomfort. It is a shame that Shrigley did not present any new work, but he deliberately chose this work, from his How Are You Feeling? show, because the public of Derry could interact with it.

He also, honestly, said that the Turner Prize usually gives people "something to talk about" and his model would provide a topic of discussion.

It is also well and cunningly made (batteries in the head run the eyelids, water for the wee comes up through the leg from a reservoir in the plinth).

Again, Shrigley, whose strain of cosmic horror and moral disgust is not seen in this work, will not be judged on this work alone, and instead on his wider portfolio, notably his recent Brain Activity show at the Hayward in London. A dry, amusing artist in person as well as on the page, it would almost be worth seeing him win just to hear his winner's speech. Sehgal may indeed take it, however.

Turner Prize 2013, Ebrington Barracks, Derry, to January 5.