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

Lackner, Mario and Stracke, Rudi and Sunde, Uwe and Winter-Ebmer, Rudolf (November 2015) Are Competitors Forward Looking in Strategic Interactions? Evidence from the Field. IHS Economics Series 319, 55 p.

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Abstract or Table of Contents

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.

Item Type: IHS Series
Keywords: Promotion tournament, multi-stage contest, elimination, forward-looking behavior, heterogeneity
Classification Codes (e.g. JEL): D84, D90, M51, J33
Status: Published
Date Deposited: 02 Dec 2015 12:55
Last Modified: 22 Jul 2017 00:23
URI: http://irihs.ihs.ac.at/id/eprint/3797

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