Tournaments with Midterm Reviews

In many tournaments investments are made over time and conducting a review only once at the end, or also at points midway through, is a strategic decision of the tournament designer. If the latter is chosen, then a rule according to which the results of the different reviews are aggregated into a ranking must also be determined. This paper takes a first step in the direction of answering how such rules are optimally designed. A characterization of the optimal aggregation rule is provided for a two-agent two-stage tournament. In particular, we show that treating the two reviews symmetrically may result in an equilibrium effort level that is inferior to the one in which only a final review is conducted. However, treating the two reviews lexicographically by first looking at the final review, and then using the midterm review only as a tie-breaking rule, strictly dominates the option of conducting a final review only. The optimal mechanism falls somewhere in between these two extreme mechanisms. It is shown that the more effective the first-stage effort is in determining the final review’s outcome, the smaller is the weight that should be assigned to the midterm review in determining the agents’ ranking

Tournaments with Midterm Reviews

In many tournaments investments are made over time and conducting a review only once at the end, or also at points midway through, is a strategic decision of the tournament designer. If the latter is chosen, then a rule according to which the results of the different reviews are aggregated into a ranking must also be determined. This paper takes a first step in the direction of answering how such rules are optimally designed. A characterization of the optimal aggregation rule is provided for a two-agent two-stage tournament. In particular, we show that treating the two reviews symmetrically may result in an equilibrium effort level that is inferior to the one in which only a final review is conducted. However, treating the two reviews lexicographically by first looking at the final review, and then using the midterm review only as a tie-breaking rule, strictly dominates the option of conducting a final review only. The optimal mechanism falls somewhere in between these two extreme mechanisms. It is shown that the more effective the first-stage effort is in determining the final review’s outcome, the smaller is the weight that should be assigned to the midterm review in determining the agents’ ranking.

Feedback in Tournaments under Commitment Problems: The-ory and Experimental Evidence

In this paper, we analyze a principal's optimal feedback policy in tournaments. We close a gap in the literature by assuming the principal to be unable to commit to a certain policy at the beginning of the tournament. Our analysis shows that in equilibrium the principal reveals in-termediate information regarding the agents’ previous performances if these performances are not too different. Moreover, we investigate a situation where the principal is not able to credi-bly communicate her information. Having presented our formal analysis, we test these results using data from laboratory experiments. The experimental findings provide some support for the model

Objective versus Subjective Performance Evaluations

Why does incentive pay often depend on subjective rather than objective performance evaluations? After all, subjective evaluations entail a credibility issue. While the most plausible explanation for this practice is lack of adequate objective measures, I argue that subjective evaluations might sometimes also be used to withhold information from the worker. I furthermore argue that withholding information is particularly important under circumstances where the credibility issue is small. The statements are derived from a two-stage principal-agent model in which the stochastic relationship between effort and performance is unknown

Tournaments, Rankings, and Time Crunches: Exploring the use of Competition Technologies in the Classroom

Two studies are presented in which a competitive online tournament is used for exam preparation. The first study looks at the effectiveness of online tournaments in motivating undergraduate students to prepare for their exams. An analysis of variance was used to assess whether participation in the review tournaments had a significant effect on achieved grades. A significant effect is discovered; suggesting that the participants’ difference in test scores is dependent on their participation amount (three tournaments versus one tournament). The second study assessed whether group members working together in a competitive tournament are more likely to pool resources and partake in peer mentoring to improve their understanding of course material in preparation for an exam. The findings from this study suggest that students who performed poorer on their mid-term exam were likely to improve significantly on their final exam, particularly if they participated in the grouped competitive final exam review

Feedback and Incentives: Experimental Evidence

This paper experimentally investigates the impact of different pay and relative performance information policies on employee effort. We explore three information policies: No feedback about relative performance, feedback given halfway through the production period, and continuously updated feedback. The pay schemes are a piece rate payment scheme and a winner-takes-all tournament. We find that, regardless of the pay scheme used, feedback does not improve performance. There are no significant peer effects in the piece-rate pay scheme. In contrast, in the tournament scheme we find some evidence of positive peer effects since the underdogs almost never quit the competition even when lagging significantly behind, and frontrunners do not slack off. Moreover, in both pay schemes information feedback reduces the quality of the low performers’ work.performance pay, tournament, piece rate, peer effects, information, feedback, evaluation, experiment

Feedback and Incentives : Experimental Evidence

This paper experimentally investigates the impact of different pay and relative performance information policies on employee effort. We explore three information policies: No feedback about relative performance, feedback given halfway through the production period, and continuously updated feedback. The pay schemes are a piece rate payment scheme and a winner-takes-all tournament. We find that, regardless of the pay scheme used, feedback does not improve performance. There are no significant peer effects in the piece-rate pay scheme. In contrast, in the tournament scheme we find some evidence of positive peer effects since the underdogs almost never quit the competition even when lagging significantly behind, and frontrunners do not slack off. Moreover, in both pay schemes information feedback reduces the quality of the low performers' work.evaluation ; feedback ; information ; laboratory experiments ; peer effects ; performance pay ; piece rate ; tournament

Gender differences in multiple-choice questions and the risk of losing points

I study the gender differences in performance in multiple-choice questions in a setting where wrong answers are penalized and the objective is to score as high points as possible. I exploit data from an undergraduate level microeconomics course at a Finnish university across a six-year period of 2010 and 2012-2016. The course consists of two equally weighted exams that include both multiple-choice and open-ended questions. The results show that, when controlling for the performance in the first exam, women omit more multiple-choice question items (MCQ) in the second exam than men which, in turn, translates to fewer points. Women do not do worse in open-ended questions that are similar to the MCQ, neither is the probability of them answering incorrectly to the MCQ higher. Hence, gender differences in test results might reflect differences in behavior in a very particular test setting rather than genuine differences in skills

Information Disclosure in Innovation Contests

In innovation contests, the progress of the competing firms in the innovation process is usually their private information. We analyze an innovation contest in which research firms have a stochastic technology to develop innovations at a fixed cost, but their progress is publicly announced. We make a comparison with the case of no information revelation: if the progress is disclosed, the expected profit of the firms is higher, but the expected profit of the sponsor is lower. Additionally, we show that firms may voluntarily reveal their information.contest, innovation, information revelation

The Alestle - Vol. 59 No. 23 - 11/07/2006

Vol. 59 No. 2