Selection Tournaments, Sabotage, and Participation

This paper studies sabotage in tournaments with at least three contestants, where the contestants know each other well. Every contestant has an incentive to direct sabotage specifically against his most dangerous rival. In equilibrium, contestants who choose a higher productive effort are sabotaged more heavily. This might explain findings from psychology, where victims of mobbing are sometimes found to be overachieving. Moreover, sabotage equalizes promotion chances. The effect is most pronounced if the production functions are linear in sabotage, and the cost functions depend only on the sum of all sabotage activities: in an interior equilibrium, who will win is a matter of chance, even when contestants differ a great deal in their abilities. This, in turn, has adverse consequences for who might want to participate in a tournament. Because better contestants anticipate that they will be sabotaged more strongly, it may happen that the most able stay out and the tournament selects one of the less able with probability one. I also study the case where some contestants are easy victims, that is, easier to sabotage than others.     

Sabotaging in contests with monitoring efforts

This paper considers a 3‐stage contest with both sabotage and monitoring efforts that aim to reduce sabotage. In the first stage, the regulator sets his monitoring efforts for each contestant. In the second stage, each contestant determines his sabotaging efforts, based on the monitoring efforts that were imposed by the regulator. In the third stage, each contestant determines his productive efforts in the contest. The results supply a justification to exert monitoring efforts because these efforts may benefit both the contestants and the regulator (a win‐win situation). Furthermore, the paper defines the conditions where exerting monitoring efforts would be worthwhile.     

Performance feedback in a group contest: A field experiment on electricity conservation

We conduct a field experiment on electricity conservation to study whether revealing both the competitive state and the social state in a group contest affects individual beliefs and efforts. Our experiment randomizes group composition, participation, and types of information received in the contest. We find that contestants without feedback about relative performance had difficulty assessing their group's competitive status, and laggards within a group tended to be overconfident about their relative contribution. In addition, we find that contestants receiving both competitive and social information were more likely to have correct beliefs about their positions during the contest and exerted the most effort. Meanwhile, contestants receiving no performance feedback did not behave differently from those who did not participate in the contest. Overall, contestants reduced their energy use by 10% during the contest. Our results support the notion that providing feedback is important in a group contest.     

Imperfect Behavior‐Based Price Discrimination

In this article, we develop a model encompassing behavior‐based discriminatory pricing as a limit case of a more general framework where firms have incomplete information about consumers’ purchase histories. We show that information accuracy has a nonmonotonic impact on profits and the worst situation for firms is when information accuracy is intermediate. We also discuss welfare and consumer surplus implications of information accuracy. Although welfare monotonically decreases with the level of information accuracy, there is an inverse U‐shape relationship between consumers surplus and information accuracy.     

Efficient Contests

In their seminal contribution, Lazear and Rosen (1981) show that wages based upon rank induce the same efficient effort as incentive‐based reward schemes. They also show that this equivalence result is not robust toward heterogeneity in worker ability, as long as ability is private information because it is not possible to structure contests to simultaneously satisfy self‐selection constraints and first‐best incentives. This paper demonstrates that efficiency can be achieved by a simple modification of the prize scheme in a mixed (heterogenous) contest where contestants learn their type after entry. If contestants know their type before entering the contest, rent extraction becomes an issue. Implications for optimal contest design are also explored. Finally, the relationship between effort maximizing contests and profit maximizing contests are discussed.     

质量随机的研发竞赛模型与最优奖励

假设研发质量具有随机性,建立了研发竞赛的非合作博弈模型,分别探讨了完全信息和不完全信息条件下竞赛参与人与竞赛发起者的最优策略。研究发现：竞赛参与人的研发投入水平在完全信息和不完全信息条件下都随自身研发效率的降低而降低;研发参与人的类型信息不完全程度越高,参与人的均衡研发投入越低;在每一种信息类型组合下都存在着最优奖励使得竞赛发起者的期望收益最大。     

Decision making under risk in Deal or No Deal

We analyse the choices of 399 contestants in the Australian version of the television game show Deal or No Deal. We calculate risk aversion bounds for each contestant, revealing considerable heterogeneity. We then estimate a structural stochastic choice model that captures the dynamic decision problem faced by contestants. To address individual heterogeneity, we nest the dynamic problem within the settings of both a random effects and a random coefficients probit model. Our structural model produces plausible estimates of risk aversion, confirms the role of individual heterogeneity and suggests that a model of stochastic choice is indeed appropriate. We find mixed evidence of greater risk aversion by females. We also examine generalizations to expected utility theory, finding that the rank‐dependent utility model adds non‐negligible explanatory power and indicates optimism in probability weighting. Finally, we test, but are unable to confirm, the existence of an endowment effect for lotteries. Copyright © 2009 John Wiley & Sons, Ltd.     

Allocating Ideas: Horizontal Competition in Tournaments

We develop a stylized model of horizontal and vertical competition in tournaments with two competing firms. The sponsor cares not only about the quality of the design but also about the design location. A priori not even the sponsor knows his preferred design location, which is only discovered once he has seen the actual proposals. We show that the more efficient firm is more likely to be conservative when choosing the design location. Also, to get some differentiation in design locations, the cost difference between contestants can be neither too small nor too big. Therefore, if the sponsor mainly cares about the design location, participation in the tournaments by the two lowest-cost contestants cannot be optimal for the sponsor.     

Problem-solving effort and success in innovation contests: The role of national wealth and national culture

Innovation contests allow firms to harness specialized skills and services from globally dispersed participants for solutions to business problems. Such contests provide a rich setting for operations management (OM) scholars to explore problem solving in global labor markets as firms continue to unbundle their innovation value chains. In this study, we examine the implications of specific types of diversity in innovation contests on problem-solving effort and success. First, we conceptualize diversity among contestants in terms of national wealth (measured as gross domestic product per capita (GDPP) adjusted for purchasing power parity) and national culture (measured using the culture dimensions of performance orientation and uncertainty avoidance) and examine how such factors influence problem-solving effort. Next, we examine how differences between contestants and contest holders in terms of the above factors influence contest outcomes. Using data from a popular online innovation contest platform and country-level archival data, we find that contestants from countries with lower levels of GDPP are more likely to exert greater problem-solving effort compared to other contestants. With regard to national culture, we find that performance orientation and uncertainty avoidance have positive and negative effects, respectively, each of which weakens with increasing levels of GDPP. Finally, our analysis provides evidence of homophily effects indicating that contestants who share greater similarities with the contest holder in terms of national wealth and national culture are more likely to be successful in a contest. We discuss the implications of the study's findings for contest holders and platform owners who organize innovation contests, and for emerging research on innovation contests.     

Exclusion in all‐pay auctions: An experimental investigation

Contest designers and managers who wish to maximize the overall revenue of a contest are frequently concerned with a trade‐off between contest homogeneity and inclusion of contestants with high valuations. In our experimental study, we find that it is not profitable to exclude the strongest bidder in order to promote greater homogeneity among the remaining bidders, even though the theoretical exclusion principle predicts otherwise. This is because the strongest bidders are willing to give up a substantial portion of their expected rent in order to minimize the chance of losing the contest.     

Sabotage in dynamic tournaments

This paper studies sabotage in a dynamic tournament. Three players compete in two rounds. In the final round, a player who is leading in the race, but not yet beyond the reach of his competitors, is sabotaged more heavily. As a consequence, if all players start off at the same position, they do not work productively or sabotage at all in the first round. Thus sabotage is not only directly destructive, but also depresses incentives to work productively. If players are heterogeneous ex ante, sabotage activities in the first round may be concentrated against an underdog, contrary to findings from static tournaments.     

On sabotage in collective tournaments

In this paper a tournament between teams (a collective tournament) is considered, where each contestant may spend productive effort in order to increase his team’s performance or sabotage the members of the opponent team. It is shown that each team directs all its sabotage activities at exactly one of the opponent team’s least able members. This is due to two effects, a decreasing-returns effect and a complementarity effect. The result is of particular interest, as findings on individual tournaments indicate that very able players should usually be sabotaged most strongly.     

Contest success function with the possibility of a draw: Axiomatization

In imperfectly discriminating contests the contestants contribute effort to win a prize but the highest contributed effort does not necessarily secure a win. The contest success function (CSF) is the technology that translates an individual's effort into his or her probability of winning. This paper provides an axiomatization of CSF when there is the possibility of a draw (the sum of winning probabilities across all contestants does not add up to one).     

Dissent,sabotage, and leader behaviour in contests: Evidence from European football

This paper provides an empirical investigation of misconducts in contests based on data from European football. We extend previous studies by differentiating between dissents with the referee and misconducts directly aimed at sabotaging the competitor. We find that sabotage is more likely committed by teams with lower ability. Dissent is more likely to be shown by teams lagging behind in score and by away teams. We further find that captains engage more in sabotage during important matches and challenge referees' decisions immediately after sanctions of teammates. Finally, we also observe a deterrence effect of sanctions on all types of misconduct.     

Time Discounting in Strategic Contests

In many contests, such as political campaigns or R&D expenditures, there is at least some trade‐off between immediate money outlay and potential future benefits. This timing aspect has mostly been ignored by the contest literature. If contestants exhibit a strong present bias, such as that shown by past individual choice experiments, then benefits that are deferred to the future will lead to a significant drop in investment. This paper uses controlled laboratory experiments to explore how the timing of prize payment impacts behavior in a contest with a unique Nash equilibrium strategy. We find no evidence that people significantly discount future prizes in our contests, despite the fact that we do replicate present bias in a separate individual choice experiment.     

Equal Pay for Unequal Work: Limiting Sabotage in Teams

We demonstrate the value of "equal pay" policies in teams, even when team members have distinct abilities and make different contributions to team performance. A commitment to compensate all team members in identical fashion eliminates the incentive that each team member otherwise has to sabotage the activities of teammates in order to induce the team owner to implement a more favorable reward structure. The reduced sabotage benefits the team owner, and can secure Pareto gains under plausible circumstances.     

Keeping a weather eye on prediction markets: The influence of environmental conditions on forecasting accuracy

Increasingly, prediction markets are being embraced as a mechanism for eliciting and aggregating dispersed information and providing a means of deriving probabilistic forecasts of future uncertain events. The efficient market hypothesis postulates that prediction market prices should incorporate all information that is relevant to the performances of the contracts traded. This paper shows that such may not be the case in relation to information regarding environmental factors such as the weather and atmospheric conditions. In the context of horserace betting markets, we demonstrate that even after the effects of these factors on the contestants (horses and jockeys) have been discounted, the accuracy of the probabilities derived from market prices is affected systematically by the prevailing weather and atmospheric conditions. We show that significantly better forecasts can be derived from prediction markets if we correct for this phenomenon, and that these improvements have substantial economic value.     

Competition with Aftermarket Power When Consumers Are Heterogeneous

We study a model of competitive foremarkets and partly monopolized aftermarkets. We show that high aftermarket power prompts firms to engage in inefficiently aggressive below‐cost pricing in the foremarket. This inefficiency is driven by the presence of consumers with valuations below marginal cost. While for intermediate aftermarket power their presence leads to a competition‐softening effect, for high aftermarket power firms attract increasing numbers of unprofitable consumers by aggressively pricing below cost. For high aftermarket power, firms' equilibrium profits can therefore be decreasing in aftermarket power but are always higher than for low aftermarket power. If firms engage in price discrimination by bundling the foremarket and aftermarket goods or by reducing their aftermarket power, they avoid selling to unprofitable consumers but also reduce the competition‐softening effect. This decreases firms' equilibrium profits but increases consumer and social welfare.     

Toward a Dynamic Theory of Intermediate Conformity

The issue of conformity to social norms has been a major focus of research. Yet, intermediate conformity, which refers to actors who are neither total conformers nor non‐conformers, has received scant attention even though the behaviour is likely widespread. This paper aims to extend the literature on conformity to social norms by laying the foundations for a tractable theory of intermediate conformity. Here, a set of key factors hypothesized to lead actors into intermediate conformity is identified and formal arguments about the dynamic‐legitimacy and reputational effects of their intermediate conformity moves are formulated. Important building blocks include a taxonomy of norms that allows for norm heterogeneity and a recognition that conformity may change over time. The developed framework provides a new conceptual lever for better understanding how intermediate conformers cope over time with social norms of different types and importance.     

Dissemination of Accruals Information,Role of Semi‐Annual Reporting,and Analysts' Earnings Forecasts: Evidence from Japan

Our study investigates the effects of dissemination of accounting accruals information on stock prices using Japanese annual reports as our sample. We conduct month‐by‐month detailed analyses of price adjustment behavior with a particular focus on revisions of analysts' earnings forecasts and changes in trading volume around the period of upcoming semi‐annual reports. We find that analysts' forecasts are often revised around this time, and analysts use this as auxiliary information. In addition, an accompanying re‐adjustment of abnormal returns and an increase in trading volume are observed. Our findings demonstrate that informational uncertainty initially triggered by the announcement of annual reports decreases as semi‐annual reports are disclosed and analysts change their earnings forecasts, and confirms the importance of semi‐annual reporting.