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Interim Rank, Risk Taking, and Performance in Dynamic Tournaments

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  • Christos Genakos
  • Mario Pagliero

Abstract

We empirically study the impact of interim rank on risk taking and performance using data on professionals competing in tournaments for large rewards. As we observe both the intended action and the performance of each participant, we can measure risk taking and performance separately. We present two key findings. First, risk taking exhibits an inverted-U relationship with interim rank. Revealing information on relative performance induces individuals trailing just behind the interim leaders to take greater risks. Second, competitors systematically underperform when ranked closer to the top, despite higher incentives to perform well. Disclosing information on relative ranking hinders interim leaders.

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File URL: http://www.jstor.org/stable/pdfplus/10.1086/668502
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File URL: http://www.jstor.org/stable/full/10.1086/668502
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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 120 (2012)
Issue (Month): 4 ()
Pages: 782 - 813

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Handle: RePEc:ucp:jpolec:doi:10.1086/668502

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Web page: http://www.journals.uchicago.edu/JPE/

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Cited by:
  1. Mueller-Langer, Frank & Andreoli-Versbach, Patrick, 2013. "Leading-effect vs. Risk-taking in Dynamic Tournaments: Evidence from a Real-life Randomized Experiment," Discussion Papers in Economics 15452, University of Munich, Department of Economics.
  2. Subhasish M. Chowdhury & Oliver Gurtler, 2013. "Sabotage in Contests: A Survey," University of East Anglia Applied and Financial Economics Working Paper Series 051, School of Economics, University of East Anglia, Norwich, UK..

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