Daniel E. Houser, Director/Professor/Chair, Economics, Interdisciplinary Center for Economic Science, received $9,420 from the National Science Foundation for: "Doctoral Dissertation Research in Economics: Asymmetric Shocks in Contests: Theory and Experiment."
Via this project, Jian Song, Co-Principal Investigator, will use economic theory and laboratory experiment to investigate how the distribution of random shocks affects the effort provisions of rank-tournament participants. In rank-order tournaments, an individual’s competitive output equals the effort she or he exerts, plus a random shock. Because of their prevalence, tournaments have received a great deal of scholarly attention. However, extant empirical and experimental literature on this topic focuses on symmetric shock distributions. This is despite the fact that asymmetric shocks are better descriptors of certain types of tournaments. For example, in “elite competitions” like the Olympics, to win, athletes exert a significant amount of effort and their scores typically cluster near the boundary of possible performance. Consequently, there is no chance that an athlete will face an extremely positive shock, however, there is a small chance that an athlete will suffer an extremely negative shock. With this research, Houser and Song will combine theory and experiment to compare effort provisions in tournaments under different shock distributions. The research design will allow the researchers to directly measure tournament participant’s effort and compare the incentive effects under different types of shocks. The findings of this research could develop an improved understanding of why and how the distributions of random shocks affect effort provision in competitive environments, shedding new light on how people make decisions when very bad outcomes are unlikely but possible.
This funding will begin in September 2021 and will end in late August 2022.
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