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

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  • 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.

Suggested Citation

  • Delfgaauw, Josse & Dur, Robert & Non, Arjan & Verbeke, Willem, 2012. "The Effects of Prize Spread and Noise in Elimination Tournaments: A Natural Field Experiment," IZA Discussion Papers 6480, Institute for the Study of Labor (IZA).
    • Handle: RePEc:iza:izadps:dp6480
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    Cited by:

    1. Englmaier, Florian & Grimm, Stefan & Schindler, David & Schudy, Simeon, 2018. "The Effect of Incentives in Non-Routine Analytical Team Tasks - Evidence From a Field Experiment," Rationality and Competition Discussion Paper Series 71, CRC TRR 190 Rationality and Competition.
    2. Gosnell, Greer & Metcalfe, Robert & List, John A, 2016. "A new approach to an age-old problem: solving externalities by incenting workers directly," LSE Research Online Documents on Economics 84331, London School of Economics and Political Science, LSE Library.
    3. Lackner, Mario & Stracke, Rudi & Sunde, Uwe & Winter-Ebmer, Rudolf, 2015. "Are Competitors Forward Looking in Strategic Interactions? Evidence from the Field," IZA Discussion Papers 9564, Institute for the Study of Labor (IZA).
    4. 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.
    5. 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.
    6. repec:eee:eecrev:v:98:y:2017:i:c:p:264-281 is not listed on IDEAS
    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.

    More about this item

    Keywords

    field experiment; incentives; prize spread; elimination tournaments; performance measurement;

    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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