Designing Multiperson Tournaments with Asymmetric Contestants: An Experimental Study

Hua Chen (), Sung H. Ham () and Noah Lim ()
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Hua Chen: Bauer College of Business, University of Houston, Houston, Texas 77204
Sung H. Ham: College of Business Administration, Kent State University, Kent, Ohio 44242
Noah Lim: Wisconsin School of Business, University of Wisconsin-Madison, Madison, Wisconsin 53706

Management Science, 2011, vol. 57, issue 5, 864-883

Abstract: Is the right amount of effort exerted in multiperson tournaments where contestants have two different levels of initial endowments (termed "favorites" and "underdogs")? We develop theoretical predictions for the level of effort and the effect of varying the prize structure. We test these predictions for three-person tournaments using an economic experiment in a social environment where contest outcomes are publicly announced. We find that both favorites and underdogs overexert effort relative to the theoretical point predictions. Moreover, in the treatment with two favorites and one underdog, favorites increase their effort when the number of prizes is increased from one to two, contrary to the theory prediction. We show that a generalized model that allows for psychological losses from losing for favorites and psychological gains from winning for underdogs because of social comparisons tracks the experimental results better than the standard theoretical model. This paper was accepted by Peter Wakker, decision analysis.

Keywords: tournaments; compensation; sales management; experimental economics; behavioral economics (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (54)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:57:y:2011:i:5:p:864-883

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