Tournament Winner Proportion and its Effect on Effort

• In Event: Tournament Incentives in Multi-Period Settings

Abstract

This study investigates whether the proportion of winners in a tournament affects effort. Prior research on this effect finds ambiguous results and employs a design that does not allow for social comparison to evolve. Further, prior studies do not require the total bonus pool to be constant when the proportion of winners changes. We use a real-effort experiment that allows social comparison to evolve and we manipulate the proportion of winners while holding the total bonus pool constant. Our results indicate that increasing the fraction of winners has a positive effect on effort. Using a causal model, we attribute this effect to greater engagement in social comparison and perception of probabilities. In addition, we find that in repeated tournaments, the change in effort is more negative the lower is the proportion of winners. This interaction effect is driven by changed behavior of winners and losers of a previous tournament.

Authors

• Thorsten Knauer, University of Muenster

• Friedrich Sommer, University of Muenster

• Arnt Woehrmann, University of Muenster