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Grind or Gamble? An Experimental Analysis of Effort and Spread Seeking in Contests

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We conduct a contest experiment to study if spread seeking and effort can be managed in a situation where participants can invest in increasing both the mean and the spread of an uncertain performance variable. Subjects are treated with different prize schemes and in accordance with theory, we observe substantial investments in spread for the winner-take-all scheme. Both types of investments can be controlled with a three-level prize scheme. However, the control management is imperfect and behavior is characterized by inertia. The winner-take-all prize scheme has many potential disadvantages including high spread and heterogeneous behavior compared to other schemes.

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  • Andersson, Ola & Holm, Håkan J. & Wengström, Erik, 2016. "Grind or Gamble? An Experimental Analysis of Effort and Spread Seeking in Contests," Working Papers 2016:37, Lund University, Department of Economics, revised 28 Jan 2019.
    • Handle: RePEc:hhs:lunewp:2016_037
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    More about this item

    Keywords

    Contest; Risk; Spread; Incentives; Institutional Choice; Experiment;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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