How Noise Affects Effort in Tournaments

34 Pages Posted: 3 Mar 2020

See all articles by Mikhail Drugov

Mikhail Drugov

Centre for Economic Policy Research (CEPR); New Economic School (NES)

Dmitry Ryvkin

Florida State University

Date Written: February 2020

Abstract

It is commonly understood that making a tournament ranking process more noisy leads to a reduction in effort exerted by players in the tournament. But what exactly does it mean to have "more noise?'' We address this question and show that the level of risk, as measured by the variance or the second-order stochastic dominance order, is not the answer, in general. For rank-order tournaments with arbitrary prizes, equilibrium effort decreases as noise becomes more dispersed, in the sense of the dispersive order. For winner-take-all tournaments, we identify a weaker version of the dispersive order we call quantile stochastic dominance, as well as other orders and entropy measures linking equilibrium effort and noise.

Keywords: dispersive order, entropy, noise, quantile stochastic dominance, tournament

JEL Classification: C72, D72, D82

Suggested Citation

Drugov, Mikhail and Ryvkin, Dmitry, How Noise Affects Effort in Tournaments (February 2020). CEPR Discussion Paper No. DP14457, Available at SSRN: https://ssrn.com/abstract=3547390

Mikhail Drugov (Contact Author)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

New Economic School (NES) ( email )

100A Novaya Street
Moscow, Skolkovo 143026
Russia

Dmitry Ryvkin

Florida State University ( email )

Tallahassee, FL 30306-2180
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
109
PlumX Metrics