Date

2022-2

Author

İNTİŞAH, Merve

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We theoretically and experimentally study the effect of random noise on effort level in individual and three different types of group contests: perfect-substitutes, best-shot, and weakest-link. Subjects compete for either a high prize value or a low prize value in individual contests. The theoretical model shows that individual effort increases with prize value but decreases with noise variance. Our experiment finds that in individual contests, subjects who compete for a low prize decrease their efforts as noise variance rises, as theoretically predicted. Contrary to the theoretical prediction, there is no effect of noise variance on the efforts of subjects who compete for a high prize. For group contests, each group has two heterogeneous players, one with a high prize valuation, named as a strong player, and one with a low prize valuation, named as a weak player. The theoretical model predicts both strong and weak players’ efforts decrease while noise variance increases in all group contests, except for weak players in best-shot contests. Our experimental analysis could not confirm the theoretical predictions for perfect-substitutes and weakest-link contests. We find no effect of noise variance on both strong and weak players’ efforts. In best-shot contest, in line with the theoretical prediction, strong players’ efforts decrease as the noise variance increases. Contrary to prediction, weak players’ effort choices are higher than 0 in both high and low noise variances, yet their efforts also decrease with random noise. Finally, we compare how subjects’ efforts differ from individual contests to group contests. We find that in all group contests, players exert effort as much as in individual contests.

Subject Keywords

contest, rank-order tournaments, random noise, prize valuations, group impact functions

URI

https://hdl.handle.net/11511/96069

Collections

Graduate School of Social Sciences, Thesis