Tournaments, Contestant Heterogeneity and Performance

TL;DR

This study analyzes how skill disparities among contestants in tournaments influence individual performance, revealing asymmetric effects and implications for contest design and policy interventions.

Contribution

It provides empirical evidence on the asymmetric impact of skill differences on contestants' performance and discusses behavioral explanations and policy implications.

Findings

Skill disparities harm lower-ability contestants' performance.

Higher-ability contestants benefit from skill disparities.

Affirmative action can mitigate adverse effects on lower-ability contestants.

Abstract

Tournaments are frequently used incentive mechanisms to enhance performance. In this paper, we use field data and show that skill disparities among contestants asymmetrically affect the performance of contestants. Skill disparities have detrimental effects on the performance of the lower-ability contestant but positive effects on the performance of the higher-ability contestant. We discuss the potential of different behavioral approaches to explain our findings and discuss the implications of our results for the optimal design of contests. Beyond that, our study reveals two important empirical results: (a) affirmative action-type policies may help to mitigate the adverse effects on lower-ability contestants, and (b) the skill level of potential future contestants in subsequent tournament stages can detrimentally influence the performance of higher-ability contestants but does not affect the lower-ability contestant.