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The Ponds Dilemma

John Morgan, Dana Sisak () and Felix Várdy

Economic Journal, 2018, vol. 128, issue 611, 1634-1682

Abstract: Is it better to be a big fish in a small pond or a small fish in a big pond? To find out, we study self†selection into contests. Our simple model predicts that: (i) entry into the big pond – in terms of show†up fees, number or value of prizes – is non†monotonic in ability; (ii) entry into the more meritocratic pond is likewise non†monotonic, exhibiting two interior extrema and disproportionately attracting very low ability types; and (iii) changes in rewards can produce unexpected effects, e.g. higher show†up fees may lower entry, while higher prizes or more meritocracy may lower the average ability of entrants.

Date: 2018
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Economic Journal is currently edited by Estelle Cantillon, Martin Cripps, Andrea Galeotti, Morten Ravn, Kjell G. Salvanes, Frederic Vermeulen, Hans-Joachim Voth and Rachel Kranton

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