The shape of luck and competition in tournaments

Mikhail Drugov and Dmitry Ryvkin

No w0251, Working Papers from Center for Economic and Financial Research (CEFIR)

Abstract: Tournaments are settings where agents' performance is determined jointly by effort and luck, and top performers are rewarded. We study the impact of the \shape of luck" { the details of the distribution of performance shocks { on incentives in tournaments. The focus is on the effect of competition, defined as the number of rivals an agent faces, which can be deterministic or stochastic. We show that individual and aggregate effort in tournaments are affected by an increase in competition in ways that depend critically on the shape of the density and failure (hazard) rate of shocks. When shocks have heavy tails, aggregate effort can decrease with stronger competition.

Keywords: tournament; competition; heavy tails; stochastic number of players; unimodality; log-supermodularity; failure rate (search for similar items in EconPapers)
JEL-codes: C72 D72 D82 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2019-01
New Economics Papers: this item is included in nep-hrm, nep-mic, nep-rmg and nep-spo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: The shape of luck and competition in tournaments (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:cfr:cefirw:w0251

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