Self-Selection and the Efficiency of Tournaments
49 Pages Posted: 17 Feb 2023
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Self-Selection and the Efficiency of Tournaments
Date Written: May 1, 2009
Abstract
The literature has shown that the overall efficiency of exogenously imposed tournaments is reduced by a high variance in performance. This paper reports results from an experiment analyzing whether allowing subjects to self-select into different payment schemes is reducing the variability of performance in tournaments. We show that when the subjects choose to enter a tournament instead of a piece-rate payment scheme, the average effort is higher and the between-subject variance is substantially lower than when the same payment scheme is imposed. Mainly based on risk aversion, sorting is efficiency-enhancing since it increases the homogeneity of the contestants.
Keywords: Tournaments, Self-selection, Experiment
JEL Classification: M52, J33, J31, C81, C91
Suggested Citation: Suggested Citation