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The Effects of Prize Spread and Noise in Elimination Tournaments: A Natural Field Experiment

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Listed author(s):
  • Delfgaauw, Josse

    ()

    (Erasmus University Rotterdam)

  • Dur, Robert

    ()

    (Erasmus University Rotterdam)

  • Non, Arjan

    ()

    (ROA, Maastricht University)

  • Verbeke, Willem

    ()

    (Erasmus University Rotterdam)

Abstract

We conduct a natural field experiment in a large retail chain to test basic predictions of tournament theory regarding prize spread and noise. A random subset of the 208 stores participates in two-stage elimination tournaments. Tournaments differ in the distribution of prize money across winners of the first and second round of the tournament. As predicted by theory, we find that a more convex prize spread increases performance in the second round at the expense of first-round performance, although the magnitude of these effects is small. Moreover, the treatment effect is significantly larger for stores that historically have relatively stable performance as compared to stores with more noisy performance.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6480.

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Length: 49 pages
Date of creation: Apr 2012
Handle: RePEc:iza:izadps:dp6480
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Keywords: field experiment; incentives; prize spread; elimination tournaments; performance measurement;

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Find related papers by JEL classification:
  • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
  • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
  • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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Cited by:

  1. Greer Gosnell & John List & Robert Metcalfe, 2016. "A New Approach to an Age-Old Problem: Solving Externalities by Incenting Workers Directly," Framed Field Experiments 00412, The Field Experiments Website.
  2. repec:unm:umaror:2015010 is not listed on IDEAS
  3. Lackner, Mario & Stracke, Rudi & Sunde, Uwe & Winter-Ebmer, Rudolf, 2015. "Are Competitors Forward Looking in Strategic Interactions? Evidence from the Field," Economics Series 319, Institute for Advanced Studies.
  4. repec:unm:umagsb:2015037 is not listed on IDEAS
  5. Jed DeVaro & Antti Kauhanen, 2016. "An “Opposing Responses” Test of Classic versus Market-Based Promotion Tournaments," Journal of Labor Economics, University of Chicago Press, vol. 34(3), pages 747-779.
  6. Hett, Florian, 2014. "Dynamic Contests with Feedback and Heterogeneity: Empirical Evidence from a Gaming App," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100494, Verein für Socialpolitik / German Economic Association.
  7. Delfgaauw, Josse & Dur, Robert & Non, Arjan & Verbeke, Willem, 2014. "Dynamic incentive effects of relative performance pay: A field experiment," Labour Economics, Elsevier, vol. 28(C), pages 1-13.
  8. Stracke, Rudi & Kerschbamer, Rudolf & Sunde, Uwe, 2015. "Prevalence and Determinants of Choice Bracketing - Experimental Evidence," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113092, Verein für Socialpolitik / German Economic Association.

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