Interim Rank, Risk Taking, and Performance in Dynamic Tournaments
AbstractWe 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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Bibliographic InfoArticle 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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Web page: http://www.journals.uchicago.edu/JPE/
Other versions of this item:
- Christos Genakos & Mario Pagliero, 2011. "Interim Rank, Risk Taking and Performance in Dynamic Tournaments," Carlo Alberto Notebooks 196, Collegio Carlo Alberto.
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
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- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
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- 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.
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