The Adverse Consequences of Tournaments: Evidence from a Field Experiment

28 Pages Posted: 4 Apr 2016

See all articles by Maria De Paola

Maria De Paola

Università degli Studi della Calabria - Department of Economics and Statistics

Francesca Gioia

Università degli Studi della Calabria

Vincenzo Scoppa

Università degli Studi della Calabria - Department of Economics and Statistics

Abstract

We run a field experiment to investigate whether competing in rank-order tournaments with different prize spreads affects individual performance. Our experiment involved students from an Italian University who took an intermediate exam in which one part was awarded on the basis of their relative performance. Students were matched in pairs on the basis of their high school grades and each pair was randomly assigned to one of three different tournaments. Random assignment neutralizes selection effects and allows us to investigate if larger prize spreads increase individual effort. We do not find any positive effect of larger prizes on students' performance and in several specifications we do find a negative effect. Furthermore, we show that the effect of prize spreads on students' performance depends on their degree of risk-aversion: competing in tournaments with large spreads negatively affects the performance of risk-averse students, while it does not produce any effect on students who are more prone to take risks.

Keywords: rank-order tournaments, incentives, prize spread, risk-aversion, randomized experiment

JEL Classification: J33, J31, J24, D81, D82, C93

Suggested Citation

De Paola, Maria and Gioia, Francesca and Scoppa, Vincenzo, The Adverse Consequences of Tournaments: Evidence from a Field Experiment. IZA Discussion Paper No. 9854. Available at SSRN: https://ssrn.com/abstract=2757964

Maria De Paola (Contact Author)

Università degli Studi della Calabria - Department of Economics and Statistics ( email )

via Ponte Bucci
Arcavacata di Rende, Cosenza 87036
Italy

Francesca Gioia

Università degli Studi della Calabria

Ponte Bucci, Cubo 3C
Rende, Cosenza 87036
Italy

Vincenzo Scoppa

Università degli Studi della Calabria - Department of Economics and Statistics ( email )

via Ponte Bucci
Arcavacata di Rende, Cosenza 87036
Italy

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