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Incentives versus Sorting in Tournaments: Evidence from a Field Experiment

  • Leuven, Edwin

    ()

    (University of Oslo)

  • Oosterbeek, Hessel

    ()

    (University of Amsterdam)

  • Sonnemans, Joep

    ()

    (University of Amsterdam)

  • van der Klaauw, Bas

    ()

    (VU University Amsterdam)

A vast body of empirical studies lends support to the incentive effects of rank-order tournaments. Evidence comes from experiments in laboratories and non-experimental studies exploiting sports or firm data. Selection of competitors across tournaments may bias these non-experimental studies, whereas short task duration or lack of distracters may limit the external validity of results obtained in lab experiments or from sports data. To address these concerns we conducted a field experiment where students selected themselves into tournaments with different prizes. Within each tournament the best performing student on the final exam of a standard introductory microeconomics course could win a substantial financial reward. A standard non-experimental analysis exploiting across tournament variation in reward size and competitiveness confirms earlier findings. We find however no evidence for effects of tournament participation on study effort and exam results when we exploit our experimental design, indicating that the non-experimental results are completely due to sorting. Treatment only affects attendance of the first workgroup meeting following the announcement of treatment status, suggesting a difference between short-run and long-run decision making.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3326.

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Length: 24 pages
Date of creation: Jan 2008
Date of revision:
Publication status: published in: Journal of Labor Economics, 2011, 29 (3), 637-658
Handle: RePEc:iza:izadps:dp3326
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  1. Uri Gneezy & John A. List, 2006. "Putting Behavioral Economics to Work: Testing for Gift Exchange in Labor Markets Using Field Experiments," NBER Working Papers 12063, National Bureau of Economic Research, Inc.
  2. Harbring, Christine & Irlenbusch, Bernd, 2003. "An experimental study on tournament design," Labour Economics, Elsevier, vol. 10(4), pages 443-464, August.
  3. Tor Eriksson & Sabrina Teyssier & Marie Claire Villeval, 2009. "Self-selection and the Efficiency of Tournaments," Post-Print halshs-00451600, HAL.
  4. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987. "Asymmetric Tournaments, Equal Opportunity Laws and Affirmative Action: Some Experimental Results," Working Papers 87-33, C.V. Starr Center for Applied Economics, New York University.
  5. 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.
  6. Edwin Leuven & Hessel Oosterbeek & Bas van der Klaauw, 2010. "The Effect of Financial Rewards on Students' Achievement: Evidence from a Randomized Experiment," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1243-1265, December.
  7. Ronald G. Ehrenberg & Michael L. Bognanno, 1988. "Do Tournaments Have Incentive Effects?," NBER Working Papers 2638, National Bureau of Economic Research, Inc.
  8. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
  9. Frans van Dijk & Joep Sonnemans & Frans van Winden, 2000. "Incentive Systems in a Real Effort Experiment," CESifo Working Paper Series 272, CESifo Group Munich.
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  11. Sunde, Uwe, 2003. "Potential, Prizes and Performance: Testing Tournament Theory with Professional Tennis Data," IZA Discussion Papers 947, Institute for the Study of Labor (IZA).
  12. Tor Eriksson & Sabrina Teyssier & Marie-Claire Villeval, 2006. "Effort Self-Selection and the Efficiency of Tournaments," Post-Print halshs-00142876, HAL.
  13. Muriel Niederle & Lise Vesterlund, 2005. "Do Women Shy Away From Competition? Do Men Compete Too Much?," NBER Working Papers 11474, National Bureau of Economic Research, Inc.
  14. Uri Gneezy & Aldo Rustichini, 2004. "Gender and Competition at a Young Age," American Economic Review, American Economic Association, vol. 94(2), pages 377-381, May.
  15. Richard B. Freeman, 2006. "Optimal Inequality/Optimal Incentives: Evidence from a Tournament," NBER Working Papers 12588, National Bureau of Economic Research, Inc.
  16. Ronald G. Ehrenberg & Michael L. Bognanno, 1990. "The incentive effects of tournaments revisited: Evidence from the European PGA tour," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 74-88, February.
  17. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  18. Edward Lazear & Ulrike Malmendier & Roberto Weber, 2006. "Sorting, Prices, and Social Preferences," NBER Working Papers 12041, National Bureau of Economic Research, Inc.
  19. John R. Carter & Michael D. Irons, 1991. "Are Economists Different, and If So, Why?," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 171-177, Spring.
  20. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
  21. Uri Gneezy & Muriel Niederle & Aldo Rustichini, 2003. "Performance In Competitive Environments: Gender Differences," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1049-1074, August.
  22. Eriksson, Tor, 1999. "Executive Compensation and Tournament Theory: Empirical Tests on Danish Data," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 262-80, April.
  23. Abrevaya, Jason, 2002. "Ladder tournaments and underdogs: lessons from professional bowling," Journal of Economic Behavior & Organization, Elsevier, vol. 47(1), pages 87-101, January.
  24. Orszag, Jonathan M., 1994. "A new look at incentive effects and golf tournaments," Economics Letters, Elsevier, vol. 46(1), pages 77-88, September.
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