The Impact of Losing in a Competition on the Willingness to Seek Further Challenges

Tinbergen Institute Discussion Paper 14-083/I

27 Pages Posted: 9 Jul 2014 Last revised: 10 Jul 2014

See all articles by Thomas Buser

Thomas Buser

University of Amsterdam - Amsterdam School of Economics (ASE)

Date Written: July 7, 2014

Abstract

How do people react to setbacks and successes? I introduce a new measure of challenge-seeking to determine the effect of winning and losing in a competition on the willingness to seek further challenges. Participants in a lab experiment compete in two-person tournaments and are then informed of their score and the outcome of the competition. Conditional on the score, winning or losing is random. Participants then have to decide on a performance target for a second round: the higher the target, the higher the potential reward, but participants who do not reach the target earn nothing. I find that, conditional on first round scores, losers go for a more challenging target but perform worse, leading to lower earnings and a higher probability of failure. These findings could have important implications for our understanding of individual career paths. Early outcomes coul d alter the probability of success and failure in the long term.

Keywords: competition, challenge seeking, career decisions, laboratory experiment, gender

JEL Classification: C91, D03, J16, J01

Suggested Citation

Buser, Thomas, The Impact of Losing in a Competition on the Willingness to Seek Further Challenges (July 7, 2014). Tinbergen Institute Discussion Paper 14-083/I, Available at SSRN: https://ssrn.com/abstract=2463179

Thomas Buser (Contact Author)

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

HOME PAGE: http://sites.google.com/site/thomasbuser/

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