On the Choice of Risk and Effort in Tournaments-Experimental Evidence
Abstract"We investigate a simple two-person tournament in a controlled laboratory experiment. Each player chooses between two distributions of random shocks. After observing the overall risk, both players decide simultaneously on their effort. Theory predicts both players should choose the distribution with the higher variance of random shock, as this minimizes equilibrium effort. We show that the effort exerted is sensitive towards risk. The agents exert less effort if the random shock is high. However, agents do not learn to commit themselves by choosing a high risk in our experiment." Copyright (c) 2010 Wiley Periodicals, Inc..
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.
Volume (Year): 19 (2010)
Issue (Month): 3 (09)
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- Lucia Marchegiani & Tommaso Reggiani & Matteo Rizzolli, 2013. "Severity vs. Leniency Bias in Performance Appraisal: Experimental evidence," BEMPS - Bozen Economics & Management Paper Series BEMPS01, School of Economics and Management at the Free University of Bozen.
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- Sheremeta, Roman M. & Wu, Steven Y., 2012. "Testing Canonical Tournament Theory: On the Impact of Risk, Social Preferences and Utility Structure," IZA Discussion Papers 6304, Institute for the Study of Labor (IZA).
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