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Designing Multiperson Tournaments with Asymmetric Contestants: An Experimental Study

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Author Info

  • Hua Chen

    ()
    (Bauer College of Business, University of Houston, Houston, Texas 77204)

  • Sung H. Ham

    ()
    (College of Business Administration, Kent State University, Kent, Ohio 44242)

  • Noah Lim

    ()
    (Wisconsin School of Business, University of Wisconsin-Madison, Madison, Wisconsin 53706)

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    Abstract

    Is the right amount of effort exerted in multiperson tournaments where contestants have two different levels of initial endowments (termed "favorites" and "underdogs")? We develop theoretical predictions for the level of effort and the effect of varying the prize structure. We test these predictions for three-person tournaments using an economic experiment in a social environment where contest outcomes are publicly announced. We find that both favorites and underdogs overexert effort relative to the theoretical point predictions. Moreover, in the treatment with two favorites and one underdog, favorites increase their effort when the number of prizes is increased from one to two, contrary to the theory prediction. We show that a generalized model that allows for psychological losses from losing for favorites and psychological gains from winning for underdogs because of social comparisons tracks the experimental results better than the standard theoretical model. This paper was accepted by Peter Wakker, decision analysis.

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    File URL: http://dx.doi.org/10.1287/mnsc.1110.1325
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 57 (2011)
    Issue (Month): 5 (May)
    Pages: 864-883

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    Handle: RePEc:inm:ormnsc:v:57:y:2011:i:5:p:864-883

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    Related research

    Keywords: tournaments; compensation; sales management; experimental economics; behavioral economics;

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    Cited by:
    1. David Kelsey & Tigran Melkonyan, 2014. "Contests with Ambiguity," Discussion Papers 1411, Exeter University, Department of Economics.
    2. Robert Shupp & Roman M. Sheremeta & David Schmidt & James Walker, 2013. "Resource Allocation Contests: Experimental Evidence," Working Papers 13-23, Chapman University, Economic Science Institute.
    3. Curtis R. Price & Roman M. Sheremeta, 2012. "Endowment Origin, Demographic Effects and Individual Preferences in Contests," Working Papers 12-07, Chapman University, Economic Science Institute.
    4. Changxia Ke & Kai A. Konrad & Florian Morath, 2012. "Alliances in the Shadow of Conflict," CESifo Working Paper Series 4056, CESifo Group Munich.
    5. Tanja Hörtnagl & Rudolf Kerschbamer & Rudi Stracke & Uwe Sunde, 2013. "Heterogeneity in Rent-Seeking Contests with Multiple Stages: Theory and Experimental Evidence," Working Papers 2013-29, Faculty of Economics and Statistics, University of Innsbruck.
    6. Magnus Hoffmann & Martin Kolmar, 2013. "Distributional Preferences in Probabilistic and Share Contests," CESifo Working Paper Series 4184, CESifo Group Munich.

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