Best-of-Three Contest Experiments: Strategic Versus Psychological Momentum

38 Pages Posted: 3 Dec 2012 Last revised: 18 Dec 2012

See all articles by Shakun D. Mago

Shakun D. Mago

University of Richmond - E. Claiborne Robins School of Business

Roman M. Sheremeta

Case Western Reserve University

Andrew Yates

University of North Carolina (UNC) at Chapel Hill - Department of Economics

Date Written: December 2, 2012

Abstract

We conduct an experimental analysis of a best-of-three contest. Intermediate prizes lead to higher efforts, while increasing the role of luck (as opposed to effort) leads to lower efforts. Both intermediate prizes and luck reduce the probability of contest ending in two rounds. The patterns of players’ efforts and the probability that a contest ends in two rounds are consistent with ‘strategic momentum’, i.e., momentum generated due to strategic incentives inherent in the contest. We do not find evidence for ‘psychological momentum’, i.e., momentum which emerges when winning affects players’ confidence. Similar to previous studies of contests, we find significantly higher efforts than predicted and strong heterogeneity in effort between subjects.

Keywords: best-of-three contest, experiments, strategic momentum, psychological momentum

JEL Classification: C72, C91, D72

Suggested Citation

Mago, Shakun Datta and Sheremeta, Roman M. and Yates, Andrew, Best-of-Three Contest Experiments: Strategic Versus Psychological Momentum (December 2, 2012). International Journal of Industrial Organization, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2184121

Shakun Datta Mago

University of Richmond - E. Claiborne Robins School of Business ( email )

Richmond, VA 23173
United States

Roman M. Sheremeta (Contact Author)

Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106
United States

Andrew Yates

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

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