| By: |
Daniel Houser (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University);
Jian Song (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University) |
| Abstract: |
Under optimal tournament design, we would expect agents to exert identical
effort regardless of the shape of the contest function’s error component. We
report data from laboratory experiments that provide a first test of this
prediction. We find that efforts do not significantly differ when the shock
distribution exhibits negative skewness versus a uniform distribution;
however, subjects react substantially differently to random shock realizations
under different treatments. Specifically, tournament winners demonstrate
stronger reactions, economically and statistically, to negatively-skewed
shocks than to uniform shocks. Meanwhile, tournament losers are less likely to
be affected by negatively-skewed shocks. Our results highlight the importance
of accounting for the influence of the shape of the shock distribution on a
contest participant’s effort. |
| Keywords: |
Asymmetric random shock, Tournament, Winner, Loser, Laboratory experiment |
| JEL: |
D90 M52 C90 |
| Date: |
2021–07 |
| URL: |
http://d.repec.org/n?u=RePEc:gms:wpaper:1081&r= |