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Performance and risk taking under threat of elimination

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  • Adams, Nathan R.
  • Waddell, Glen R.

Abstract

We revisit the incentive effects of elimination tournaments with a fresh approach to identification, the results of which strongly support that performance improves under the threat of elimination and does so, but only in part, due to increases in risk taking. Where we can separately identify changes in risk-independent performance and risk taking, our estimates suggest that at least 23 percent of the improvement in performance induced by potential elimination is due to productive increases in risk taking. These effects are concentrated among those closest to the margin of elimination and among lower-ability competitors.

Suggested Citation

  • Adams, Nathan R. & Waddell, Glen R., 2018. "Performance and risk taking under threat of elimination," Journal of Economic Behavior & Organization, Elsevier, vol. 156(C), pages 41-54.
    • Handle: RePEc:eee:jeborg:v:156:y:2018:i:c:p:41-54
    DOI: 10.1016/j.jebo.2018.09.014
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    References listed on IDEAS

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    Cited by:

    1. McFall, Todd & Rotthoff, Kurt W., 2020. "Risk-taking dynamics in tournaments: Evidence from professional golf," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 378-394.
    2. Wen‐Jhan Jane, 2024. "Interim performance information and risk taking in a tournament—Field evidence from professional basketball," Scottish Journal of Political Economy, Scottish Economic Society, vol. 71(2), pages 145-174, May.

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    More about this item

    Keywords

    Tournament; Contract; Risk; Sports;
    All these keywords.

    JEL classification:

    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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