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The Effects of Prize Spread and Noise in Elimination Tournaments: A Natural Field Experiment

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Author Info

  • Josse Delfgaauw

    (Erasmus University Rotterdam)

  • Robert Dur

    (Erasmus University Rotterdam, CESifo, IZA)

  • Arjan Non

    (Erasmus University Rotterdam)

  • Willem Verbeke

    (Erasmus University Rotterdam, ERIM)

Abstract

We conduct a field experiment in a large retail chain to test basic predictions of tournament theory regarding prize spread and noise. A random subset of the 208 stores participates in two-stage elimination tournaments. Tournaments differ in the distribution of prize money across winners of the first and second round of the tournament. As predicted by theory, we find that a more convex prize spread increases performance in the second round at the expense of first-round performance, although the magnitude of these effects is small. Moreover, the treatment effect is significantly larger for stores that historically have relatively stable performance as compared to stores with more noisy performance.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 11-120/1.

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Date of creation: 11 Aug 2011
Date of revision: 03 Oct 2013
Handle: RePEc:dgr:uvatin:20110120

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Web page: http://www.tinbergen.nl

Related research

Keywords: Elimination tournaments; Incentives; Prize spread; Performance measurement; Field experiment;

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References

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Cited by:
  1. Stracke, Rudi & Höchtl, Wolfgang & Kerschbamer, Rudolf & Sunde, Uwe, 2013. "Optimal Prizes in Dynamic Elimination Contests: An Experimental Analysis," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79883, Verein für Socialpolitik / German Economic Association.
  2. Delfgaauw, Josse & Dur, Robert & Non, Arjan & Verbeke, Willem, 2013. "Dynamic Incentive Effects of Relative Performance Pay: A Field Experiment," IZA Discussion Papers 7652, Institute for the Study of Labor (IZA).

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