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Incentives versus Sorting in Tournaments: Evidence from a Field Experiment

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Author Info

  • Leuven, Edwin

    ()
    (University of Oslo)

  • Oosterbeek, Hessel

    ()
    (University of Amsterdam)

  • Sonnemans, Joep

    ()
    (University of Amsterdam)

  • van der Klaauw, Bas

    ()
    (VU University Amsterdam)

Abstract

A vast body of empirical studies lends support to the incentive effects of rank-order tournaments. Evidence comes from experiments in laboratories and non-experimental studies exploiting sports or firm data. Selection of competitors across tournaments may bias these non-experimental studies, whereas short task duration or lack of distracters may limit the external validity of results obtained in lab experiments or from sports data. To address these concerns we conducted a field experiment where students selected themselves into tournaments with different prizes. Within each tournament the best performing student on the final exam of a standard introductory microeconomics course could win a substantial financial reward. A standard non-experimental analysis exploiting across tournament variation in reward size and competitiveness confirms earlier findings. We find however no evidence for effects of tournament participation on study effort and exam results when we exploit our experimental design, indicating that the non-experimental results are completely due to sorting. Treatment only affects attendance of the first workgroup meeting following the announcement of treatment status, suggesting a difference between short-run and long-run decision making.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3326.

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Length: 24 pages
Date of creation: Jan 2008
Date of revision:
Publication status: published in: Journal of Labor Economics, 2011, 29 (3), 637-658
Handle: RePEc:iza:izadps:dp3326

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Keywords: incentives; sorting; field experiments; tournaments;

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References

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  1. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  2. Tor Eriksson & Sabrina Teyssier & Marie-Claire Villeval, 2006. "Self-Selection and the Efficiency of Tournaments," Working Papers, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure 0603, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  3. Ronald G. Ehrenberg & Michael L. Bognanno, 1988. "Do Tournaments Have Incentive Effects?," NBER Working Papers 2638, National Bureau of Economic Research, Inc.
  4. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 21(2), pages 153-174, Spring.
  5. Eriksson, Tor, 1999. "Executive Compensation and Tournament Theory: Empirical Tests on Danish Data," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(2), pages 262-80, April.
  6. Leuven, Edwin & Oosterbeek, Hessel & van der Klaauw, Bas, 2003. "The Effect of Financial Rewards on Students' Achievements: Evidence from a Randomized Experiment," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3921, C.E.P.R. Discussion Papers.
  7. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987. "Tournaments and Piece Rates: An Experimental Study," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(1), pages 1-33, February.
  8. Uri Gneezy & John A. List, 2006. "Putting Behavioral Economics to Work: Testing for Gift Exchange in Labor Markets Using Field Experiments," NBER Working Papers 12063, National Bureau of Economic Research, Inc.
  9. Sunde, Uwe, 2003. "Potential, Prizes and Performance: Testing Tournament Theory with Professional Tennis Data," IZA Discussion Papers 947, Institute for the Study of Labor (IZA).
  10. Frans van Dijk & Joep Sonnemans & Frans van Winden, 1998. "Incentive Systems in a Real Effort Experiment," Tinbergen Institute Discussion Papers 98-023/1, Tinbergen Institute.
  11. Edward Lazear & Ulrike Malmendier & Roberto Weber, 2006. "Sorting, Prices, and Social Preferences," NBER Working Papers 12041, National Bureau of Economic Research, Inc.
  12. Muriel Niederle & Lise Vesterlund, 2005. "Do Women Shy Away From Competition? Do Men Compete Too Much?," NBER Working Papers 11474, National Bureau of Economic Research, Inc.
  13. Gibbs, Michael, 1995. "Incentive compensation in a corporate hierarchy," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 19(2-3), pages 247-277, April.
  14. Tor Eriksson & Sabrina Teyssier & Marie-Claire Villeval, 2006. "Effort Self-Selection and the Efficiency of Tournaments," Post-Print, HAL halshs-00142876, HAL.
  15. Edward P. Lazear, 1996. "Performance Pay and Productivity," NBER Working Papers 5672, National Bureau of Economic Research, Inc.
  16. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987. "Asymmetric Tournaments, Equal Opportunity Laws and Affirmative Action: Some Experimental Results," Working Papers, C.V. Starr Center for Applied Economics, New York University 87-33, C.V. Starr Center for Applied Economics, New York University.
  17. John R. Carter & Michael D. Irons, 1991. "Are Economists Different, and If So, Why?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 5(2), pages 171-177, Spring.
  18. Richard B. Freeman, 2006. "Optimal Inequality/Optimal Incentives: Evidence from a Tournament," NBER Working Papers 12588, National Bureau of Economic Research, Inc.
  19. Harbring, Christine & Irlenbusch, Bernd, 2003. "An experimental study on tournament design," Labour Economics, Elsevier, Elsevier, vol. 10(4), pages 443-464, August.
  20. Uri Gneezy & Aldo Rustichini, 2004. "Gender and Competition at a Young Age," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 377-381, May.
  21. Ronald G. Ehrenberg & Michael L. Bognanno, 1990. "The incentive effects of tournaments revisited: Evidence from the European PGA tour," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 74-88, February.
  22. Orszag, Jonathan M., 1994. "A new look at incentive effects and golf tournaments," Economics Letters, Elsevier, Elsevier, vol. 46(1), pages 77-88, September.
  23. Edwin Leuven & Hessel Oosterbeek & Bas van der Klaauw, 2004. "The e ect of financial rewards on students achievement: Evidence from a randomized experiment," HEW, EconWPA 0410002, EconWPA.
  24. Uri Gneezy & Muriel Niederle & Aldo Rustichini, 2003. "Performance In Competitive Environments: Gender Differences," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(3), pages 1049-1074, August.
  25. Abrevaya, Jason, 2002. "Ladder tournaments and underdogs: lessons from professional bowling," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 47(1), pages 87-101, January.
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Citations

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Cited by:
  1. Frick, Bernd, 2011. "Gender differences in competitiveness: Empirical evidence from professional distance running," Labour Economics, Elsevier, Elsevier, vol. 18(3), pages 389-398, June.
  2. Leuven, Edwin & Oosterbeek, Hessel & van der Klaauw, Bas, 2010. "Splitting Tournaments," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8016, C.E.P.R. Discussion Papers.
  3. Ketel, Nadine & Linde, Jona & Oosterbeek, Hessel & van der Klaauw, Bas, 2014. "Tuition Fees as a Commitment Device," IZA Discussion Papers 7951, Institute for the Study of Labor (IZA).
  4. Thomas Buser, 2014. "The Impact of Losing in a Competition on the Willingness to seek Further Challenges," Tinbergen Institute Discussion Papers 14-083/I, Tinbergen Institute.
  5. Thomas Buser, 2014. "The Impact of Losing in a Competition on the Willingness to Seek Further Challenges," CESifo Working Paper Series 4904, CESifo Group Munich.

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