Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2011-08-11 Revision-Date: 2013-10-03 Number: 11-120/1 Author-Name: Josse Delfgaauw Author-Workplace-Name: Erasmus University Rotterdam Author-Name: Robert Dur Author-Workplace-Name: Erasmus University Rotterdam, CESifo, IZA Author-Name: Arjan Non Author-Workplace-Name: Erasmus University Rotterdam Author-Name: Willem Verbeke Author-Workplace-Name: Erasmus University Rotterdam, ERIM Title: The Effects of Prize Spread and Noise in Elimination Tournaments: A Natural Field Experiment Abstract: This discussion paper led to a publication in the Journal of Labor Economics.
We conduct a field experiment in a large retail chain to test basic 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 round of the tournament. As predicted by theory, we find that a more convex prize spread increases performance in the second round at the expense of first-round performance, although the magnitude of these effects is small. Moreover, the treatment effect is significantly larger for stores that historically have relatively stable performance as compared to stores with more noisy performance. Classification-JEL: C93, M51, M52 Keywords: Elimination tournaments, Incentives, Prize spread, Performance measurement, Field experiment File-Url: http://papers.tinbergen.nl/11120.pdf File-Format: application/pdf File-Size: 477682 bytes Handle: RePEc:tin:wpaper:20110120