Tournament Fever and the Perception of Strategic Uncertainty in Performance Contests
AbstractAs firms implement tournament bonus reward schemes, mainly the idea is to introduce competition amongst their agents in the order to promote their performance. Tournaments in which agents compete for a bonus by investing effort, are frequently applied, e.g., in development races, political contests, and promotion tournaments. The fallibility of evaluation processes and the inherent variability of competitors' effort choices introduce uncertainty to tournament settings with respect to the outcome. If heterogeneous agents interact in such a setting, experimental results suggest that increasing uncertainty leads to more excess of effort if compared to optimality (Avrahami et al., 2007). This paper experimentally investigates whether the observed overperformance in the tournament is similar to overbidding in auctions. Furthermore, it disentangles two possible sources of over-performance: either biased responses to, or wrong beliefs of, opponents' effort choices. We show that over-performance can be explained by "tournament fever": agents overreact to own beliefs, if compared to best responses, and mainly overestimate their opponents. Leveling uncertainty influences both overshooting and the precision of beliefs.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2008-057.
Date of creation: 16 Jul 2008
Date of revision:
uncertainty; incentive effects; tournament fever; auction fever; all-pay auction;
Find related papers by JEL classification:
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- M42 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Auditing
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
- M55 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Contracting Devices
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Markus Pasche).
If references are entirely missing, you can add them using this form.