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Interim Rank, Risk Taking and Performance in Dynamic Tournaments

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  • Christos Genakos
  • Mario Pagliero

Abstract

Little is known about the effects of revealing information on relative performance during a dynamic tournament. We empirically study the impact of interim rank on risk taking and performance using data on professionals competing in tournaments for large rewards. As our data allows us to observe both the intended action and the performance of each participant, we can thus measure risk taking and performance separately. We present two key findings. First, risk taking exhibits an inverted-U relationship with interim rank. Revealing information on relative performance induces individuals trailing just behind the interim leaders to take greater risks. Second, competitors systematically underperform when ranked closer to the top, despite higher incentives to perform well. Disclosing information on relative ranking hinders interim leaders.

Suggested Citation

  • Christos Genakos & Mario Pagliero, 2011. "Interim Rank, Risk Taking and Performance in Dynamic Tournaments," Carlo Alberto Notebooks 196, Collegio Carlo Alberto.
  • Handle: RePEc:cca:wpaper:196
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    References listed on IDEAS

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    More about this item

    Keywords

    Dynamic tournaments; interim ranking; relative performance; risk taking;

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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