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Grind or Gamble? An Experimental Analysis of Effort and Spread Seeking in Contests

Ola Andersson, Hakan Holm () and Erik Wengström ()

No 2016:37, Working Papers from Lund University, Department of Economics

Abstract: We conduct a contest experiment to study if spread seeking and effort can be managed in a situation where participants can invest in increasing both the mean and the spread of an uncertain performance variable. Subjects are treated with different prize schemes and in accordance with theory, we observe substantial investments in spread for the winner-take-all scheme. Both types of investments can be controlled with a three-level prize scheme. However, the control management is imperfect and behavior is characterized by inertia. The winner-take-all prize scheme has many potential disadvantages including high spread and heterogeneous behavior compared to other schemes.

Keywords: Contest; Risk; Spread; Incentives; Institutional Choice; Experiment (search for similar items in EconPapers)
JEL-codes: C70 D02 D03 D80 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-ore
Date: 2016-12-30, Revised 2019-01-28
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Working Paper: Grind or Gamble? An Experimental Analysis of Effort and Spread Seeking in Contests (2017) Downloads
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