Browsing by Author "Reichert, Patrik"

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    Relative Comparisons in Organizations and Society
    (2025-06-10) Reichert, Patrik
    “Contests for Perception” We observe competitive behavior in different domains of society, even without explicit monetary prizes. In this paper, I model a mechanism that may drive such behavior: I study a contest model where prizes are given by an inactive observer’s posterior belief about a player’s ability. In other words, prizes are determined endogenously in the model. I define the equilibrium in this game and show how expected effort changes with two exogenous parameters: the probability of an agent being high ability and the difference in productive ability between types. I show that expected effort is maximized when uncertainty about players’ abilities is the highest. I identify a novel encouragement effect of ability asymmetry. Total expected effort can increase in ability asymmetry: when the prizes are determined in equilibrium, the discouragement effect from ability heterogeneity can be reversed when heterogeneity is sufficiently low. I also analyze win probabilities when allowing for the observer’s prior to depend on players’ identities: I identify the “underdog effect” where initially decreasing the prior belief about the ability of the player with lower expected ability can nonetheless increase her win probability. Keywords: Contests, Social Image, Status JEL Classification: D01, D91, M50 “Meritocracy in Hierarchical Organizations” Competitive promotions are perceived as meritocratic because they typically select talented players with a high probability. We show that in hierarchical organizations with more than two layers, this may not be true; competition backfires by inducing middle managers to block the promotion of talented subordinates to protect their own career prospects. Uncompetitive promotions mitigate this but may introduce a new trade-off: while maximizing middle-manager ability, they need not maximize top-tier ability. Whether this trade-off occurs depends non-trivially on bottom-tier ability and how noisily middle managers infer subordinates’ abilities. We discuss implications for wage inequality, effort incentives, and up-or-out rules. Keywords: Moral Hazard, Talent Identification, Promotions, Hierarchies, Meritocracy, Contests JEL Classification: D82, J01, M51 “Discouraged by Competition?!” We run a large online experiment where workers compete for monetary prizes based on their performance rank in a real-effort task. We test whether increasing competition through (1) greater prize inequality or (2) larger contest scale affects effort provision. Contrary to the theoretical predictions in Fang, Noe, and Strack (2020), we find that increased competition does not discourage effort. Concentrating the fixed monetary sum into fewer, higher-value prizes both boosts effort provision by over 27% and leads to more dispersed behavior among participants. Increasing contest scale by combining several smaller competitions into a larger one also appears to raise effort provision, although the differences are not statistically significant at conventional levels. We account for our findings with a novel theoretical model that incorporates stimulus-based attention into all-pay contests. Keywords: Contests, Inequality, Attention, Focusing, Salience JEL Classification: M52, J31, D31, D44, D63