Document Type

Article

Publication Date

7-2020

Abstract

We investigate the role of performance feedback, in the form of a public leaderboard, in a sequential-sampling contest with costly observations. The player whose sequential random sample contains the observation with the highest value wins the contest and obtains a prize with a fixed value. We find that there exist parameter configurations such that in the subgame perfect equilibrium of contests with a fixed ending date (i.e., finite horizon), providing public performance feedback results in fewer expected observations and a lower expected value of the winning observation. We conduct a controlled laboratory experiment to test the theoretical predictions, and find that the experimental results largely support the theory. In addition, we investigate how individual characteristics affect competitive sequential-sampling activity. We find that risk aversion is a significant predictor of behavior both with and without leaderboard feedback, and that the direction of this effect is consistent with the theoretical predictions.

Comments

ESI Working Paper 19-34

Previously posted in November 2019 as "Public Leaderboard Feedback in Innovation Contests: A Theoretical and Experimental Investigation".

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