The Effects of Prize Spread and Noise in Elimination Tournaments: A Natural Field Experiment

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Abstract

We conduct a natural field experiment in a retail chain to test predictions of tournament theory regarding prize spread and noise. A random subset of the 208 stores participates in two-stage elimination tournaments. Tournaments differ in the distribution of prize money across winners of the first and second rounds of the tournament. As predicted, we find that a more convex prize spread increases second-round performance at the expense of first-round performance, although the magnitude of these effects is small. Moreover, the treatment effect is larger for stores with more stable past performance.
Original languageEnglish
Pages (from-to)521-569
Number of pages49
JournalJournal of Labor Economics
Volume33
Issue number3
DOIs
Publication statusPublished - 2015

Research programs

  • EUR ESE 34

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