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The shape of luck and competition in tournaments

Author

Listed:
  • Mikhail Drugov

    (New Economic School and CEPR)

  • Dmitry Ryvkin

    (Department of Economics, Florida State University)

Abstract

Tournaments are settings where agents' performance is determined jointly by effort and luck, and top performers are rewarded. We study the impact of the \shape of luck" { the details of the distribution of performance shocks { on incentives in tournaments. The focus is on the effect of competition, defined as the number of rivals an agent faces, which can be deterministic or stochastic. We show that individual and aggregate effort in tournaments are affected by an increase in competition in ways that depend critically on the shape of the density and failure (hazard) rate of shocks. When shocks have heavy tails, aggregate effort can decrease with stronger competition.

Suggested Citation

  • Mikhail Drugov & Dmitry Ryvkin, 2019. "The shape of luck and competition in tournaments," Working Papers w0251, Center for Economic and Financial Research (CEFIR).
    • Handle: RePEc:cfr:cefirw:w0251
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    References listed on IDEAS

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    Cited by:

    1. Christoph March & Marco Sahm, 2019. "The Perks of Being in the Smaller Team: Incentives in Overlapping Contests," CESifo Working Paper Series 7994, CESifo.
    2. Luke Boosey & Philip Brookins & Dmitry Ryvkin, 2020. "Information Disclosure in Contests with Endogenous Entry: An Experiment," Management Science, INFORMS, vol. 66(11), pages 5128-5150, November.

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    More about this item

    Keywords

    tournament; competition; heavy tails; stochastic number of players; unimodality; log-supermodularity; failure rate;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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