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The shape of luck and competition in winner-take-all tournaments

Author

Listed:
  • Ryvkin, Dmitry

    (Department of Economics, Florida State University)

  • Drugov, Mikhail

    (Department of Economics, New Economic School / CEPR)

Abstract

In winner-take-all tournaments, agents' performance is determined jointly by effort and luck, and the top performer is rewarded. We study the impact of the ``shape of luck'' -- the details of the distribution of performance shocks -- on incentives in such settings. We are concerned with the effects of increasing the number of competitors, which can be deterministic or stochastic, on individual and aggregate effort. We show that these effects are determined by the shape of the density and failure (hazard) rate of the distribution of shocks. When shocks have heavy tails, aggregate effort can decrease in the number of competitors.

Suggested Citation

  • Ryvkin, Dmitry & Drugov, Mikhail, 0. "The shape of luck and competition in winner-take-all tournaments," Theoretical Economics, Econometric Society.
  • Handle: RePEc:the:publsh:3824
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    References listed on IDEAS

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    Cited by:

    1. Drugov, Mikhail & Ryvkin, Dmitry, 2020. "How noise affects effort in tournaments," Journal of Economic Theory, Elsevier, vol. 188(C).
    2. Drugov, Mikhail & Ryvkin, Dmitry, 2020. "Tournament rewards and heavy tails," Journal of Economic Theory, Elsevier, vol. 190(C).
    3. Luke Boosey & Philip Brookins & Dmitry Ryvkin, 2020. "Entry in group contests," Working Papers wp2020_02_01, Department of Economics, Florida State University.

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    More about this item

    Keywords

    Tournament; competition; heavy tails; stochastic number of players; unimodality; log-supermodularity; failure rate;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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