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Performance responses to competition across skill levels in rank‐order tournaments: field evidence and implications for tournament design
Author(s) -
Boudreau Kevin J.,
Lakhani Karim R.,
Menietti Michael
Publication year - 2016
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12121
Subject(s) - tournament , counterfactual thinking , competitor analysis , competition (biology) , order (exchange) , rank (graph theory) , microeconomics , economics , field (mathematics) , computer science , econometrics , industrial organization , psychology , mathematics , management , social psychology , ecology , finance , combinatorics , pure mathematics , biology
Tournaments are widely used in the economy to organize production and innovation. We study individual data on 2775 contestants in 755 software algorithm development contests with random assignment. The performance response to added contestants varies nonmonotonically across contestants of different abilities, precisely conforming to theoretical predictions. Most participants respond negatively, whereas the highest‐skilled contestants respond positively. In counterfactual simulations, we interpret a number of tournament design policies (number of competitors, prize allocation and structure, number of divisions, open entry) and assess their effectiveness in shaping optimal tournament outcomes for a designer.