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

Andersson, Ola LU ; Holm, Håkan J. LU and Wengström, Erik LU (2016) In Working Papers 2016(37).
Abstract
We conduct a contest experiment 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. We find that both types of investments can be controlled with a three level prize scheme. However, the control is imperfect and behavior is characterized by inertia. The winner-take-all prize scheme has many disadvantages including high spread and heterogeneous behavior. The scheme where only one loser is punished appears superior; it generates high mean, low spread and is most popular.
Please use this url to cite or link to this publication:
author
; and
organization
publishing date
type
Working paper/Preprint
publication status
published
subject
keywords
contest, risk, spread, incentives, institutional choice, experiment, C70, D02, D03, D80
in
Working Papers
volume
2016
issue
37
pages
66 pages
publisher
Department of Economics, Lund University
language
English
LU publication?
yes
id
347caefa-f4e3-4321-8ee7-5ef70d7aabd6
alternative location
http://swopec.hhs.se/lunewp/abs/lunewp2016_037.htm
date added to LUP
2017-01-17 15:26:18
date last changed
2020-12-04 11:11:30
@misc{347caefa-f4e3-4321-8ee7-5ef70d7aabd6,
  abstract     = {{We conduct a contest experiment 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. We find that both types of investments can be controlled with a three level prize scheme. However, the control is imperfect and behavior is characterized by inertia. The winner-take-all prize scheme has many disadvantages including high spread and heterogeneous behavior. The scheme where only one loser is punished appears superior; it generates high mean, low spread and is most popular.}},
  author       = {{Andersson, Ola and Holm, Håkan J. and Wengström, Erik}},
  keywords     = {{contest; risk; spread; incentives; institutional choice; experiment; C70; D02; D03; D80}},
  language     = {{eng}},
  month        = {{12}},
  note         = {{Working Paper}},
  number       = {{37}},
  publisher    = {{Department of Economics, Lund University}},
  series       = {{Working Papers}},
  title        = {{Grind or Gamble? : An Experimental Analysis of Effort and Spread Seeking in Contests}},
  url          = {{http://swopec.hhs.se/lunewp/abs/lunewp2016_037.htm}},
  volume       = {{2016}},
  year         = {{2016}},
}