ICES Experimental Economics Brown Bag Lecture

Asymmetric Shocks in Contests: Theory and Experiment

Thursday, December 10, 2020 12:00 PM to 1:30 PM
Online Location, Zoom Meeting

The Interdisciplinary Center for Economic Science (ICES) presents an ICES Brown Bag Lecture featuring:

Jian Song

George Mason University

Asymmetric Shocks in Contests: Theory and Experiment 

 

Please contact ICES Office Manager (sbahabib@gmu.edu) for Zoom link.

 

Abstract

Under optimal tournament design, we would expect agents to exert same efforts regardless of the shape of the contest function’s error component. We report data from laboratory experiments that provide a first test of this prediction. We find that efforts do not significantly differ when the shock distribution exhibits negative skewness versus a uniform distribution. However, subjects react substantially differently to random shock realizations under different treatments. Specifically, tournament winners demonstrate stronger reactions, economically and statistically, to negatively-skewed shocks than to uniform shocks. Meanwhile, tournament losers are less likely to be affected by negatively-skewed shocks. Our results highlight the importance of accounting for the influence of the shape of the shock distribution on a contest participant’s effort.

 

For more information about the Brown Bag Lectures, please visit the Brown Bag Schedule homepage.