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Are Competitors Forward Looking in Strategic Interactions? Evidence from the Field

Author

Listed:
  • Lackner, Mario

    (University of Linz)

  • Stracke, Rudi

    (University of Munich)

  • Sunde, Uwe

    (University of Munich)

  • Winter-Ebmer, Rudolf

    (Johannes Kepler University Linz)

Abstract
This paper investigates empirically whether decision makers are forward looking in dynamic strategic interactions. In particular, we test whether decision makers in multi-stage tournaments take heterogeneity induced changes of continuation values and the ability of their immediate opponent into account when choosing effort. Using data from professional and semi-professional basketball tournaments, we find that effort is negatively affected by the ability of the current opponent, consistent with the theoretical prediction and previous evidence. More importantly, the results indicate that the expected relative strength in future interactions does affect behavior in earlier stages, which provides support for the 'standard' view that decision makers are forward looking in dynamic strategic interactions.

Suggested Citation

  • Lackner, Mario & Stracke, Rudi & Sunde, Uwe & Winter-Ebmer, Rudolf, 2015. "Are Competitors Forward Looking in Strategic Interactions? Evidence from the Field," IZA Discussion Papers 9564, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp9564
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Angelova, Vera & Giebe, Thomas & Ivanova-Stenzel, Radosveta, 2018. "Does a short-term increase in incentives boost performance?," Economics Letters, Elsevier, vol. 166(C), pages 31-34.
    2. Chadi, Adrian & de Pinto, Marco & Schultze, Gabriel, 2019. "Young, gifted and lazy? The role of ability and labor market prospects in student effort decisions," Economics of Education Review, Elsevier, vol. 72(C), pages 66-79.
    3. Grossmann, Martin & Hottiger, Dieter, 2020. "Liquidity constraints and the formation of unbalanced contests," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    4. Stefan Thiem, 2021. "Spillover Effects in Contests with Heterogeneous Players - Evidence from European Football," Applied Economics, Taylor & Francis Journals, vol. 53(12), pages 1378-1394, March.
    5. Mario Lackner, 2016. "Teams as Superstars: Effort and Risk Taking in Rank-Order Tournaments for Women and Men," Economics working papers 2016-13, Department of Economics, Johannes Kepler University Linz, Austria.
    6. Christian Deutscher & Marco Sahm & Sandra Schneemann & Hendrik Sonnabend, 2019. "Strategic Investment Decisions in Multi-stage Contests with Heterogeneous Players," CESifo Working Paper Series 7474, CESifo.
    7. Bhattacharya, Puja & Rampal, Jeevant, 2019. "Contests within and between groups," Discussion Papers, Research Unit: Market Behavior SP II 2019-206, WZB Berlin Social Science Center.
    8. Christian Deutscher & Marco Sahm & Sandra Schneemann & Hendrik Sonnabend, 2022. "Strategic investment decisions in multi-stage contests with heterogeneous players," Theory and Decision, Springer, vol. 93(2), pages 281-317, September.

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    More about this item

    Keywords

    forward-looking behavior; heterogeneity; elimination; multi-stage contest; promotion tournament;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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