Designing Multiperson Tournaments with Asymmetric Contestants: An Experimental Study
Is the right amount of effort exerted in multiperson tournaments where contestants have two different levels of initial endowments (termed "favorites" and "underdogs")? We develop theoretical predictions for the level of effort and the effect of varying the prize structure. We test these predictions for three-person tournaments using an economic experiment in a social environment where contest outcomes are publicly announced. We find that both favorites and underdogs overexert effort relative to the theoretical point predictions. Moreover, in the treatment with two favorites and one underdog, favorites increase their effort when the number of prizes is increased from one to two, contrary to the theory prediction. We show that a generalized model that allows for psychological losses from losing for favorites and psychological gains from winning for underdogs because of social comparisons tracks the experimental results better than the standard theoretical model. This paper was accepted by Peter Wakker, decision analysis.
Volume (Year): 57 (2011)
Issue (Month): 5 (May)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- O'Keeffe, Mary & Viscusi, W Kip & Zeckhauser, Richard J, 1984. "Economic Contests: Comparative Reward Schemes," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 27-56, January.
- Ajay Kalra & Mengze Shi, 2001. "Designing Optimal Sales Contests: A Theoretical Perspective," Marketing Science, INFORMS, vol. 20(2), pages 170-193, December.
- Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987.
"Tournaments and Piece Rates: An Experimental Study,"
Journal of Political Economy,
University of Chicago Press, vol. 95(1), pages 1-33, February.
- Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1985. "Tournaments and Piece Rates: An Experimental Study," Working Papers 85-21, C.V. Starr Center for Applied Economics, New York University.
- Wilfred Amaldoss & Sanjay Jain, 2005. "Conspicuous Consumption and Sophisticated Thinking," Management Science, INFORMS, vol. 51(10), pages 1449-1466, October.
- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-291, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- William Stein & Amnon Rapoport, 2005. "Symmetric two-stage contests with budget constraints," Public Choice, Springer, vol. 124(3), pages 309-328, September.
- 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.
- Jerry R. Green & Nancy L. Stokey, 1982.
"A Comparison of Tournaments and Contracts,"
NBER Working Papers
0840, National Bureau of Economic Research, Inc.
- Andrew Schotter & Keith Weigelt, 1992. "Asymmetric Tournaments, Equal Opportunity Laws, and Affirmative Action: Some Experimental Results," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 511-539.
- Min Ding & Jehoshua Eliashberg & Joel Huber & Ritesh Saini, 2005. "Emotional Bidders---An Analytical and Experimental Examination of Consumers' Behavior in a Priceline-Like Reverse Auction," Management Science, INFORMS, vol. 51(3), pages 352-364, March.
- Barry J. Nalebuff & Joseph E. Stiglitz, 1983. "Prices and Incentives: Towards a General Theory of Compensation and Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 21-43, Spring.
- Alannah Orrison & Andrew Schotter & Keith Weigelt, 2004. "Multiperson Tournaments: An Experimental Examination," Management Science, INFORMS, vol. 50(2), pages 268-279, February.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:57:y:2011:i:5:p:864-883. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If references are entirely missing, you can add them using this form.