Envy and loss aversion in tournaments

Gerald Eisenkopf and Sabrina Teyssier

Journal of Economic Psychology, 2013, vol. 34, issue C, 240-255

Abstract: Tournaments require a large gap in prizes in order to induce incentives. The resulting unequal distribution suggests that monetary payoffs are not the only motive that determines agents’ decisions. In our experiment we test theoretical predictions about the role of envy and loss aversion in tournaments. Our results confirm that the limitation of inequity between subjects’ payments implies lower effort while the elimination of losses relative to expectations decreases the variance of effort. They suggest that envy and loss aversion drive behavior in tournaments. Moreover, we show that standard theory provides a good explanation for competitive behavior when envy and loss aversion do not play a role in the decision making process.

Keywords: Tournament; Envy; Loss aversion; Experiment (search for similar items in EconPapers)
JEL-codes: C90 D03 M52 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:34:y:2013:i:c:p:240-255

DOI: 10.1016/j.joep.2012.06.006

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