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Title: Asymmetric shocks in contests: Theory and experiment
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.  more » « less
Award ID(s):
2048519
PAR ID:
10539255
Author(s) / Creator(s):
;
Publisher / Repository:
Elsevier
Date Published:
Journal Name:
Journal of Economic Behavior and Organization
Volume:
216
ISSN:
0167-2681
Page Range / eLocation ID:
243-267
Subject(s) / Keyword(s):
Asymmetric random shock Tournament Laboratory experiment Off-equilibrium behavior
Format(s):
Medium: X
Sponsoring Org:
National Science Foundation
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