Tournaments, Contestant Heterogeneity, and Performance

Tournaments are widely used incentive mechanisms. We study how skill disparities shape performance in tournaments using field data. Skill disparities among contestants asymmetrically affect performance. Larger skill disparities reduce performance of lower-ability contestants but improve performance of higher-ability contestants. We discuss potential behavioral mechanisms underlying these patterns and implications for optimal contest design. Our analysis also reveals two additional empirical findings. First, affirmative action–type policies may mitigate adverse effects on lower-ability contestants. Second, skill levels of potential future contestants in later tournament stages can reduce the performance of higher-ability contestants but do not affect lower-ability contestants.