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.