Incentives versus sorting in tournaments : evidence from a field experiment

A vast body of empirical studies lends support to the incentive effects of rankorder tournaments. Direct evidence comes from experiments in laboratories or from non-experimental sports events (golf, tennis). The short duration of the tasks at hand or the lack of distractors may, however, limit the external validity of the findings from these studies. Moreover, non-experimental results can be biased due to (self-)selection. To address these concerns we conducted a field experiment where the best performing student on the final exam of a standard introductory microeconomics course could win a substantial financial reward. A standard non-experimental analysis confirms earlier findings. We find however no evidence for effects of tournament participation on study effort and exam results when we exploit our experimental design, indicating that the non-experimental results are due to sorting. The only exception is that treatment has a significant impact on attendance of the first workgroup meeting immediately after the announcement of treatment status, suggesting a difference between short-run and long-run decision making