IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v156y2018icp41-54.html
   My bibliography  Save this article

Performance and risk taking under threat of elimination

Author

Listed:
  • Adams, Nathan R.
  • Waddell, Glen R.

Abstract

We revisit the incentive effects of elimination tournaments with a fresh approach to identification, the results of which strongly support that performance improves under the threat of elimination and does so, but only in part, due to increases in risk taking. Where we can separately identify changes in risk-independent performance and risk taking, our estimates suggest that at least 23 percent of the improvement in performance induced by potential elimination is due to productive increases in risk taking. These effects are concentrated among those closest to the margin of elimination and among lower-ability competitors.

Suggested Citation

  • Adams, Nathan R. & Waddell, Glen R., 2018. "Performance and risk taking under threat of elimination," Journal of Economic Behavior & Organization, Elsevier, vol. 156(C), pages 41-54.
    • Handle: RePEc:eee:jeborg:v:156:y:2018:i:c:p:41-54
    DOI: 10.1016/j.jebo.2018.09.014
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268118302622
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2018.09.014?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. 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 841-864, October.
    2. Jennifer Brown, 2011. "Quitters Never Win: The (Adverse) Incentive Effects of Competing with Superstars," Journal of Political Economy, University of Chicago Press, vol. 119(5), pages 982-1013.
    3. Christos Genakos & Mario Pagliero, 2012. "Interim Rank, Risk Taking, and Performance in Dynamic Tournaments," Journal of Political Economy, University of Chicago Press, vol. 120(4), pages 782-813.
    4. Ozbeklik, Serkan & Smith, Janet Kiholm, 2017. "Risk taking in competition: Evidence from match play golf tournaments," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 506-523.
    5. Jose M. Garcia & E. Frank Stephenson, 2015. "Does Stableford Scoring Incentivize More Aggressive Golf?," Journal of Sports Economics, , vol. 16(6), pages 647-663, August.
    6. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    7. Chevalier, Judith & Ellison, Glenn, 1997. "Risk Taking by Mutual Funds as a Response to Incentives," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1167-1200, December.
    8. Orszag, Jonathan M., 1994. "A new look at incentive effects and golf tournaments," Economics Letters, Elsevier, vol. 46(1), pages 77-88, September.
    9. Beck A. Taylor & Justin G. Trogdon, 2002. "Losing to Win: Tournament Incentives in the National Basketball Association," Journal of Labor Economics, University of Chicago Press, vol. 20(1), pages 23-41, January.
    10. Devin G. Pope & Maurice E. Schweitzer, 2011. "Is Tiger Woods Loss Averse? Persistent Bias in the Face of Experience, Competition, and High Stakes," American Economic Review, American Economic Association, vol. 101(1), pages 129-157, February.
    11. Christian Grund & Jan Höcker & Stefan Zimmermann, 2013. "Incidence And Consequences Of Risk-Taking Behavior In Tournaments—Evidence From The Nba," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1489-1501, April.
    12. Knoeber, Charles R & Thurman, Walter N, 1994. "Testing the Theory of Tournaments: An Empirical Analysis of Broiler Production," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 155-179, April.
    13. Ehrenberg, Ronald G & Bognanno, Michael L, 1990. "Do Tournaments Have Incentive Effects?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1307-1324, December.
    14. Luís M. B. Cabral, 2003. "R&D Competition when firms Choose Variance," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(1), pages 139-150, March.
    15. Mueller-Langer, Frank & Andreoli-Versbach, Patrick, 2013. "Leading-effect vs. Risk-taking in Dynamic Tournaments: Evidence from a Real-life Randomized Experiment," Discussion Papers in Economics 15452, University of Munich, Department of Economics.
    16. Jonathan Guryan & Kory Kroft & Matthew J. Notowidigdo, 2009. "Peer Effects in the Workplace: Evidence from Random Groupings in Professional Golf Tournaments," American Economic Journal: Applied Economics, American Economic Association, vol. 1(4), pages 34-68, October.
    17. Alex Imas, 2016. "The Realization Effect: Risk-Taking after Realized versus Paper Losses," American Economic Review, American Economic Association, vol. 106(8), pages 2086-2109, August.
    18. Ryan Oprea, 2014. "Survival versus Profit Maximization in a Dynamic Stochastic Experiment," Econometrica, Econometric Society, vol. 82, pages 2225-2255, November.
    19. Ronald G. Ehrenberg & Michael L. Bognanno, 1990. "The Incentive Effects of Tournaments Revisited: Evidence from the European PGA Tour," ILR Review, Cornell University, ILR School, vol. 43(3), pages 74, April.
    20. Taylor, Jonathan, 2003. "Risk-taking behavior in mutual fund tournaments," Journal of Economic Behavior & Organization, Elsevier, vol. 50(3), pages 373-383, March.
    21. Barron, John M. & Waddell, Glen R., 2008. "Work hard, not smart: Stock options in executive compensation," Journal of Economic Behavior & Organization, Elsevier, vol. 66(3-4), pages 767-790, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. McFall, Todd & Rotthoff, Kurt W., 2020. "Risk-taking dynamics in tournaments: Evidence from professional golf," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 378-394.
    2. Wen‐Jhan Jane, 2024. "Interim performance information and risk taking in a tournament—Field evidence from professional basketball," Scottish Journal of Political Economy, Scottish Economic Society, vol. 71(2), pages 145-174, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Adams, Nathan R. & Waddell, Glen R., 2017. "Performance and Risk Taking under Threat of Elimination," IZA Discussion Papers 10977, Institute of Labor Economics (IZA).
    2. Ozbeklik, Serkan & Smith, Janet Kiholm, 2017. "Risk taking in competition: Evidence from match play golf tournaments," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 506-523.
    3. Jennifer Brown, 2011. "Quitters Never Win: The (Adverse) Incentive Effects of Competing with Superstars," Journal of Political Economy, University of Chicago Press, vol. 119(5), pages 982-1013.
    4. Mueller-Langer, Frank & Andreoli-Versbach, Patrick, 2013. "Leading-effect vs. Risk-taking in Dynamic Tournaments: Evidence from a Real-life Randomized Experiment," Discussion Papers in Economics 15452, University of Munich, Department of Economics.
    5. Brian Hill, 2014. "The Heat Is On," Journal of Sports Economics, , vol. 15(4), pages 315-337, August.
    6. Jörg Franke, 2012. "The incentive effects of levelling the playing field -- an empirical analysis of amateur golf tournaments," Applied Economics, Taylor & Francis Journals, vol. 44(9), pages 1193-1200, March.
    7. Mueller-Langer Frank & Andreoli-Versbach Patrick, 2017. "Leading-Effect, Risk-Taking and Sabotage in Two-Stage Tournaments: Evidence from a Natural Experiment," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 237(1), pages 1-28, February.
    8. Tanaka, Ryuichi & Ishino, Kazutoshi, 2012. "Testing the incentive effects in tournaments with a superstar," Journal of the Japanese and International Economies, Elsevier, vol. 26(3), pages 393-404.
    9. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    10. Migheli, Matteo, 2019. "Competing for promotion: Are “THE BEST” always the best?," Research in Economics, Elsevier, vol. 73(2), pages 149-161.
    11. Christos Genakos & Mario Pagliero, 2012. "Interim Rank, Risk Taking, and Performance in Dynamic Tournaments," Journal of Political Economy, University of Chicago Press, vol. 120(4), pages 782-813.
    12. Raja Kali & David Pastoriza & Jean‐François Plante, 2018. "The burden of glory: Competing for nonmonetary incentives in rank‐order tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(1), pages 102-118, March.
    13. Wen‐Jhan Jane, 2024. "Interim performance information and risk taking in a tournament—Field evidence from professional basketball," Scottish Journal of Political Economy, Scottish Economic Society, vol. 71(2), pages 145-174, May.
    14. Miklos-Thal, Jeanine & Ullrich, Hannes, 2010. "Effort in Nomination Contests: Evidence from Professional Soccer," MPRA Paper 24340, University Library of Munich, Germany.
    15. Madonia, Greg & Smith, Austin C., 2019. "All-In or checked-out? Disincentives and selection in income share agreements," Journal of Economic Behavior & Organization, Elsevier, vol. 161(C), pages 52-67.
    16. Tor Eriksson & Sabrina Teyssier & Marie‐Claire Villeval, 2009. "Self‐Selection And The Efficiency Of Tournaments," Economic Inquiry, Western Economic Association International, vol. 47(3), pages 530-548, July.
    17. Thierry Lallemand & Robert Plasman & François Rycx, 2008. "Women and Competition in Elimination Tournaments," Journal of Sports Economics, , vol. 9(1), pages 3-19, February.
    18. Michael Babington & Sebastian J. Goerg & Carl Kitchens, 2020. "Do Tournaments With Superstars Encourage or Discourage Competition?," Journal of Sports Economics, , vol. 21(1), pages 44-63, January.
    19. Kato, Takao & Shu, Pian, 2016. "Competition and social identity in the workplace: Evidence from a Chinese textile firm," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 37-50.
    20. Bar-Eli, Michael & Krumer, Alex & Morgulev, Elia, 2020. "Ask not what economics can do for sports - Ask what sports can do for economics," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 89(C).
    21. Carr, Michael D., 2011. "Work hours and wage inequality: Evidence from the 2004 WERS," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(4), pages 417-427, August.

    More about this item

    Keywords

    Tournament; Contract; Risk; Sports;
    All these keywords.

    JEL classification:

    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:156:y:2018:i:c:p:41-54. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.