How noise affects effort in tournaments

Mikhail Drugov and Dmitry Ryvkin

No 14457, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: It is commonly understood that making a tournament ranking process more noisy leads to a reduction in effort exerted by players in the tournament. But what exactly does it mean to have ``more noise?'' We address this question and show that the level of risk, as measured by the variance or the second-order stochastic dominance order, is not the answer, in general. For rank-order tournaments with arbitrary prizes, equilibrium effort decreases as noise becomes more dispersed, in the sense of the dispersive order. For winner-take-all tournaments, we identify a weaker version of the dispersive order we call quantile stochastic dominance, as well as other orders and entropy measures linking equilibrium effort and noise.

Keywords: Tournament; Noise; Dispersive order; Quantile stochastic dominance; Entropy (search for similar items in EconPapers)
JEL-codes: C72 D72 D82 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-ore
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Citations: View citations in EconPapers (12)

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