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Information and Competition Entry

Author

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  • Ewers, Mara

    (Institut der deutschen Wirtschaft Köln (IW))

Abstract

This paper studies the influence of information on entry choices in a competition with a controlled laboratory experiment. We investigate whether information provision attracts mainly high productivity individuals and reduces competition failure, where competition failure occurs when a subject loses the competition because the opponent holds a higher productivity. Information on the opponent is a promising nudge to raise individuals' awareness towards the complexity of the decision problem and to update beliefs about success. In the experiment, subjects face the choice between a competition game and a safe outside option. We analyze subjects' entry behavior with a benchmark treatment without information and three treatments, where we exogenously manipulate the information on the opponents. Our results are, (1) information on the productivity distribution of all potential opponents reduces competition failures by more than 50%, (2) information on the distribution is sufficient, i.e. precise information on the matched opponent's type does not further diminish failure rates.

Suggested Citation

  • Ewers, Mara, 2012. "Information and Competition Entry," IZA Discussion Papers 6411, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp6411
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    References listed on IDEAS

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    Cited by:

    1. Brandts, Jordi & Rott, Christina, 2021. "Advice from women and men and selection into competition," Journal of Economic Psychology, Elsevier, vol. 82(C).
    2. Shastry, Gauri Kartini & Shurchkov, Olga & Xia, Lingjun Lotus, 2020. "Luck or skill: How women and men react to noisy feedback," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 88(C).
    3. Jeworrek, Sabrina, 2019. "Gender stereotypes still in MIND: Information on relative performance and competition entry," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 82(C).
    4. Fellner-Röhling, Gerlinde & Hromek, Kristijan & Kleinknecht, Janina & Ludwig, Sandra, 2023. "How to counteract biased self-assessments? An experimental investigation of reactions to social information," Journal of Economic Behavior & Organization, Elsevier, vol. 206(C), pages 1-25.
    5. Jordi Brandts & Valeska Groenert & Christina Rott, 2015. "The Impact of Advice on Women's and Men's Selection into Competition," Management Science, INFORMS, vol. 61(5), pages 1018-1035, May.
    6. Jeworrek, Sabrina, 2016. "Competition Entry and Relative Performance Feedback: The Importance of Information Disaggregated by Gender," VfS Annual Conference 2016 (Augsburg): Demographic Change 145859, Verein für Socialpolitik / German Economic Association.
    7. Baier, Alexandra & Davis, Brent J. & Jaber-Lopez, Tarek & Seidl, Michael, 2018. "Gender, competition and the effect of feedback and task: An experiment," Working Paper Forschungsförderung 062, Hans-Böckler-Stiftung, Düsseldorf.
    8. Gary Charness & Aldo Rustichini & Jeroen Ven, 2018. "Self-confidence and strategic behavior," Experimental Economics, Springer;Economic Science Association, vol. 21(1), pages 72-98, March.
    9. Murad, Zahra, 2016. "Does group discussion lead to better informed and more strategic market entry decisions?," Economics Letters, Elsevier, vol. 144(C), pages 25-28.

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    More about this item

    Keywords

    competition; experiment; information; overconfidence; self-assessment; self-selection; tournament;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

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