The Impact of Losing in a Competition on the Willingness to Seek Further Challenges

26 Pages Posted: 14 Aug 2014

See all articles by Thomas Buser

Thomas Buser

University of Amsterdam - Amsterdam School of Economics (ASE)

Date Written: July 30, 2014

Abstract

How do people react to setbacks and successes? I introduce a new measure of challenge-seeking to determine the effect of winning and losing in a competition on the willingness to seek further challenges. Participants in a lab experiment compete in two-person tournaments and are then informed of their score and the outcome of the competition. Conditional on the score, winning or losing is random. Participants then have to decide on a performance target for a second round: the higher the target, the higher the potential reward, but participants who do not reach the target earn nothing. I find that, conditional on first round scores, losers go for a more challenging target but perform worse, leading to lower earnings and a higher probability of failure. These findings could have important implications for our understanding of individual career paths. Early outcomes could alter the probability of success and failure in the long term.

Keywords: competition, challenge seeking, career decisions, laboratory experiment, gender

JEL Classification: C910, D030, J160, J010

Suggested Citation

Buser, Thomas, The Impact of Losing in a Competition on the Willingness to Seek Further Challenges (July 30, 2014). CESifo Working Paper Series No. 4904, Available at SSRN: https://ssrn.com/abstract=2479837

Thomas Buser (Contact Author)

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

HOME PAGE: http://sites.google.com/site/thomasbuser/

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