‘Having the Lead’ vs. ‘Lagging Behind’: The Incentive Effect of Handicaps in Tournaments

24 Pages Posted: 13 Sep 2018  

Andreas Steinmayr

Ludwig Maximilian University of Munich - Faculty of Economics

Rudi Stracke

Ludwig Maximilian University of Munich

Dainis Zegners

Erasmus Univeristy Rotterdam School of Management

Date Written: August 29, 2018

Abstract

We seek to answer whether handicaps can restore optimal effort provision by agents in heterogeneous contests. To this end, we study data from swimming relay competitions where swimmers with heterogeneous abilities inherit leads or lags from their previous team members. Inheriting a lead or lag corresponds to a head start or handicap affecting the effective level of heterogeneity in races. Our results suggest that as predicted by theory appropriately chosen handicaps can restore optimal effort provision: In our data, swimmers who receive a lead (lag) that compensates for their ability disadvantage (advantage) exert the same effort as swimmers in balanced races. This implies that unbalanced contests are equally likely to induce optimal effort provision, given that head starts and handicaps are appropriately chosen to compensate for ability differences between contestants.

Keywords: Heterogeneity Contest Tournament

JEL Classification: D23

Suggested Citation

Steinmayr, Andreas and Stracke, Rudi and Zegners, Dainis, ‘Having the Lead’ vs. ‘Lagging Behind’: The Incentive Effect of Handicaps in Tournaments (August 29, 2018). Available at SSRN: https://ssrn.com/abstract=3240627 or http://dx.doi.org/10.2139/ssrn.3240627

Andreas Steinmayr

Ludwig Maximilian University of Munich - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

Rudi Stracke

Ludwig Maximilian University of Munich ( email )

Geschwister-Scholl-Platz 1
Munich, Bavaria 80539
Germany

Dainis Zegners (Contact Author)

Erasmus Univeristy Rotterdam School of Management ( email )

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