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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. Tor Eriksson & Sabrina Teyssier & Marie-Claire Villeval, 2006. "Self-Selection and the Efficiency of Tournaments," Working Papers 0603, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  2. Edwin Leuven & Hessel Oosterbeek & Bas van der Klaauw, 2010. "The Effect of Financial Rewards on Students' Achievement: Evidence from a Randomized Experiment," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1243-1265, December.
  3. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
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  5. Tor Eriksson & Sabrina Teyssier & Marie-Claire Villeval, 2006. "Effort Self-Selection and the Efficiency of Tournaments," Post-Print halshs-00142876, HAL.
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  11. Muriel Niederle & Lise Vesterlund, 2005. "Do Women Shy Away from Competition? Do Men Compete too Much?," Discussion Papers 04-030, Stanford Institute for Economic Policy Research.
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  13. Eriksson, Tor, 1999. "Executive Compensation and Tournament Theory: Empirical Tests on Danish Data," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 262-80, April.
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  17. Uri Gneezy & John List, 2006. "Putting behavioral economics to work: Testing for gift exchange in labor markets using field experiments," Natural Field Experiments 00259, The Field Experiments Website.
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  20. Harbring, Christine & Irlenbusch, Bernd, 2003. "An experimental study on tournament design," Labour Economics, Elsevier, vol. 10(4), pages 443-464, August.
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  22. Gibbs, Michael, 1995. "Incentive compensation in a corporate hierarchy," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 247-277, April.
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  24. John R. Carter & Michael D. Irons, 1991. "Are Economists Different, and If So, Why?," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 171-177, Spring.
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Citations

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Cited by:
  1. Leuven, Edwin & Oosterbeek, Hessel & van der Klaauw, Bas, 2010. "Splitting Tournaments," CEPR Discussion Papers 8016, C.E.P.R. Discussion Papers.
  2. Frick, Bernd, 2011. "Gender differences in competitiveness: Empirical evidence from professional distance running," Labour Economics, Elsevier, vol. 18(3), pages 389-398, June.

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