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Morgan, J., Sisak, D. and Várdy, F. (2017). The Ponds Dilemma Economic Journal, 128(611):1634--1682.
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Affiliated author
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Publication year2018
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JournalEconomic Journal
Is it better to be a big fish in a small pond or a small fish in a big pond? To find out, we study self-selection into contests. Our simple model predicts that: 1) entry into the big pond–in terms of show-up fees, number or value of prizes–is non-monotonic in ability; 2) entry into the more meritocratic pond is likewise non-monotonic, exhibiting two interior extrema and disproportionately attracting very low ability types; and 3) changes in rewards can produce unexpected effects. E.g., higher show-up fees may lower entry, while higher prizes or more meritocracy may lower the average ability of entrants.