Payoffs in Contests

Many tournaments take place in the public eye; imbuing the outcomes with signaling value. In this article, the results of an online field experiment on signaling incentives in these public tournaments are presented. The value... [ view full abstract ]

Many tournaments take place in the public eye; imbuing the outcomes with signaling value. In this article, the results of an online field experiment on signaling incentives in these public tournaments are presented. The value associated with the prizes varies monotonically; more is never worse. However, competitors place substantial value on participating in the contest beyond the value of the nominal prizes. This value is sensitive to the nature of the nominal prize, dropping precipitously when high cash payouts are combined with high signaling incentives. In all conditions, the perceived value of the prizes differs from the nominal value. Competitors tend to undervalue small prizes and overvalue large prizes.