Document Type
Article
Publication Date
10-25-2023
Abstract
Under optimal tournament design, equilibrium effort is invariant to the shape of the mean-zero additive stochastic component, often referred to as a “shock” or “noise”. We report data from laboratory experiments providing the first test of this prediction. Consistent with theory, we find that average effort does not significantly differ between a negatively skewed and uniform shock distribution. In addition, we test a second theoretical prediction that, in winner tournaments, when the shock distribution is asymmetric as in our design, one should exert minimum effort whenever one's competitors are exerting above equilibrium effort. With a symmetric shock distribution as in our design, efforts should generally remain substantial, even when one's competitors are exerting effort above equilibrium value. Our data reveal that subjects actively engage in the tournament even when faced with aggressive competitors under both shock distributions.
Recommended Citation
Song, J., & Houser, D. (2023). Asymmetric shocks in contests: Theory and experiment. Journal of Economic Behavior & Organization, 216, 243-267. https://doi.org/10.1016/j.jebo.2023.10.008
Peer Reviewed
1
Copyright
Elsevier
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
Comments
NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Economic Behavior & Organization. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Behavior & Organization, volume 216, in 2023. https://doi.org/10.1016/j.jebo.2023.10.008
The Creative Commons license below applies only to this version of the article.