Interim Rank, Risk Taking and Performance in Dynamic Tournaments
AbstractLittle is known about the effects of revealing information on relative performance during a dynamic tournament. We empirically study the impact of interim rank on risk taking and performance using data on professionals competing in tournaments for large rewards. As our data allows us to observe both the intended action and the performance of each participant, we can thus 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 InfoPaper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 196.
Length: 47 pages
Date of creation: 2011
Date of revision:
Dynamic tournaments; interim ranking; relative performance; risk taking;
Other versions of this item:
- Christos Genakos & Mario Pagliero, 2012. "Interim Rank, Risk Taking, and Performance in Dynamic Tournaments," Journal of Political Economy, University of Chicago Press, vol. 120(4), pages 782 - 813.
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
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- M50 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - General
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-19 (All new papers)
- NEP-CIS-2011-02-19 (Confederation of Independent States)
- NEP-CTA-2011-02-19 (Contract Theory & Applications)
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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.
- 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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