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Are Competitors Forward Looking in Strategic Interactions? Evidence from the Field

Author

Listed:
  • Lackner, Mario

    (Department of Economics, University of Linz (JKU))

  • Stracke, Rudi

    (Department of Economics, University of Munich (LMU))

  • Sunde, Uwe

    (Department of Economics, University of Munich (LMU))

  • Winter-Ebmer, Rudolf

    (Department of Economics, University of Linz (JKU) and Institute for Advanced Studies, Vienna)

Abstract

This paper investigates empirically whether decision makers are forward looking in dynamic strategic interactions. In particular, we test whether decision makers in multi-stage tournaments take heterogeneity induced changes of continuation values and the ability of their immediate opponent into account when choosing effort. Using data from professional and semi-professional basketball tournaments, we find that effort is negatively affected by the ability of the current opponent, consistent with the theoretical prediction and previous evidence. More importantly, the results indicate that the expected relative strength in future interactions does affect behavior in earlier stages, which provides support for the 'standard' view that decision makers are forward looking in dynamic strategic interactions.

Suggested Citation

  • Lackner, Mario & Stracke, Rudi & Sunde, Uwe & Winter-Ebmer, Rudolf, 2015. "Are Competitors Forward Looking in Strategic Interactions? Evidence from the Field," Economics Series 319, Institute for Advanced Studies.
    • Handle: RePEc:ihs:ihsesp:319
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    File URL: https://irihs.ihs.ac.at/id/eprint/3797
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Christian Deutscher & Marco Sahm & Sandra Schneemann & Hendrik Sonnabend, 2019. "Strategic Investment Decisions in Multi-stage Contests with Heterogeneous Players," CESifo Working Paper Series 7474, CESifo.
    2. Angelova, Vera & Giebe, Thomas & Ivanova-Stenzel, Radosveta, 2018. "Does a short-term increase in incentives boost performance?," Economics Letters, Elsevier, vol. 166(C), pages 31-34.
    3. Chadi, Adrian & de Pinto, Marco & Schultze, Gabriel, 2019. "Young, gifted and lazy? The role of ability and labor market prospects in student effort decisions," Economics of Education Review, Elsevier, vol. 72(C), pages 66-79.
    4. Grossmann, Martin & Hottiger, Dieter, 2020. "Liquidity constraints and the formation of unbalanced contests," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    5. Bhattacharya, Puja & Rampal, Jeevant, 2019. "Contests within and between groups," Discussion Papers, Research Unit: Market Behavior SP II 2019-206, WZB Berlin Social Science Center.
    6. Stefan Thiem, 2021. "Spillover Effects in Contests with Heterogeneous Players - Evidence from European Football," Applied Economics, Taylor & Francis Journals, vol. 53(12), pages 1378-1394, March.
    7. Christian Deutscher & Marco Sahm & Sandra Schneemann & Hendrik Sonnabend, 2022. "Strategic investment decisions in multi-stage contests with heterogeneous players," Theory and Decision, Springer, vol. 93(2), pages 281-317, September.
    8. Mario Lackner, 2016. "Teams as Superstars: Effort and Risk Taking in Rank-Order Tournaments for Women and Men," Economics working papers 2016-13, Department of Economics, Johannes Kepler University Linz, Austria.

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    More about this item

    Keywords

    Promotion tournament; multi-stage contest; elimination; forward-looking behavior; heterogeneity;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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