Testing Canonical Tournament Theory: On the Impact of Risk, Social Preferences and Utility Structure

Sheremeta, Roman M.; Wu, Steven Y.

doi:10.2139/ssrn.1988452

Cited by 3 publications

(1 citation statement)

References 32 publications

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“…2 See Sheremeta and Wu (2012) who argue in favor of preferences that are non-separable between consumption and effort and entail pro-and anti-social components.…”

Section: Introductionmentioning

confidence: 99%

Distributional preferences in probabilistic and share contests

Hoffmann

Kolmar

2017

Journal of Economic Behavior & Organization

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We analyze Nash equilibria of share and probabilistic contests when players have distributional preferences. If players are sufficiently similar, distributional preferences create multiple equilibria. For the case of only mildly heterogeneous players, equilibrium effort can be lower as well as higher than effort with standard, selfish preferences. These findings can explain three anomalies in empirical tests of the probabilistic prize-seeking game, namely the large variance of effort levels (overspreading), individual spending that exceeds the Nashequilibrium prediction (overspending), and aggregate spending that exceeds the value of the prize (overdissipation), and they are also in line with the findings for share contests. If players are sufficiently heterogeneous, the game has a unique equilibrium that is more egalitarian than the standard, selfish Nash equilibrium. It turns out that the less talented competitor may win the larger share of the prize if his inequality aversion is sufficiently strong. We analyze how the equilibria evolve if the number of players gets larger and how sequential moves influence behavior. Two new insights follow from the analysis of the sequential-move game. First, sequential moves act as a coordination device if there are multiple simultaneous equilibria, and second the inequality aversion of the more egalitarian player can be used as a commitment device for low effort. This effect can reverse the conventional wisdom that the underdog should lead. Terms of use: Documents inJEL-Code: D030, D720, D740.

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“…2 See Sheremeta and Wu (2012) who argue in favor of preferences that are non-separable between consumption and effort and entail pro-and anti-social components.…”

Section: Introductionmentioning

confidence: 99%

Distributional preferences in probabilistic and share contests

Hoffmann

Kolmar

2017

Journal of Economic Behavior & Organization

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Does it Matter Which Effort Task You Use? A Comparison of Four Effort Tasks When Agents Compete for a Prize

2015

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Effort tasks are commonly used to assess individual investment and performance in an experimental setting. Although the tasks used are diverse, they are typically intended to be equivalent as far as they aim to generalize beyond the specific task. We compare an induced value effort task and three real effort tasks in a contest game. Results show that there is no equivalence across tasks in relation to how risk attitude, anxiety and gender predict performance.

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Randomness, uncertainty, and the optimal college football championship tournament size

Muller

Hood

Sokol

2023

Journal of Sports Analytics

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Every year, there is a popular debate over how many teams should take part in the NCAA’s FBS-level college football championship tournament, and especially whether it should be expanded from 4 teams to 8 or even 12. The inherent tradeoff is that the larger the tournament, the higher the probability that the true best team is included (“validity”), but the lower the probability that the true best team will avoid being upset and win the tournament (“effectiveness”). Using simulation based on empiricially-derived estimates of the ability to measure true team quality and the amount of randomness inherent in each game, we show that the effect of expanding the tournament to 8 teams could be very small, an effectiveness decrease of only 2-3% while increasing validity by 1-4%, while a 7-team tournament provides slightly better tradeoffs. A 12-team tournament would decrease effectiveness by 5-6%.

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Testing Canonical Tournament Theory: On the Impact of Risk, Social Preferences and Utility Structure

Cited by 3 publications

References 32 publications

Distributional preferences in probabilistic and share contests

Distributional preferences in probabilistic and share contests

Does it Matter Which Effort Task You Use? A Comparison of Four Effort Tasks When Agents Compete for a Prize

Randomness, uncertainty, and the optimal college football championship tournament size

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