Performance responses to competition across skill-levels in rank order tournaments: field evidence and implications for tournament design

Boudreau, K, Guinan, E and Lakhani, K R (2016) Performance responses to competition across skill-levels in rank order tournaments: field evidence and implications for tournament design. RAND Journal of Economics, 47 (1). pp. 140-165. ISSN 0741-6261

Abstract

Tournaments are widely used in the economy to organize production and innovation. We study individual contestant-level data on 2796 contestants in 774 software algorithm design contests with random assignment. Precisely conforming to theory predictions,the performance response to added contestants varies non-monotonically across contestantsof different abilities; most respond negatively to competition; highest-skilledcontestants respond positively. In counterfactual simulations, we interpret a numberof tournament design policies (number of competitors, prize allocation and structure, divisionalization, open entry) as a means of reconciling non-monotonic incentive responses to competition, effectively manipulating the number and skills distribution of contestants facing one another.