Contests, Grand Prizes, and the Hot Hand

34 Pages Posted: 15 Feb 2006 Last revised: 12 Apr 2012

See all articles by Todd McFall

Todd McFall

Welch Consulting

Charles R. Knoeber

North Carolina State University - Poole College of Management

Walter N. Thurman

North Carolina State University; PERC - Property and Environment Research Center

Date Written: September 10, 2008

Abstract

Awarding a grand prize to the player who wins most often in a series of contests links the contests together and makes incentives in the current contest depend upon past performance. A lucky player who wins early faces relatively stronger incentives to exert effort because of his early success. As a consequence early winners are more likely to keep winning through the middle of the series. That is, a grand prize induces a hot hand. We develop this argument and assess it empirically using data from the Professional Golfers' Association Tour, before and after a grand prize, the season-ending Tour Championship, was introduced.

Keywords: hot hand, tournaments, asymmetric

JEL Classification: D8, J4, M5

Suggested Citation

McFall, Todd and Knoeber, Charles R. and Thurman, Walter N., Contests, Grand Prizes, and the Hot Hand (September 10, 2008). Available at SSRN: https://ssrn.com/abstract=881562 or http://dx.doi.org/10.2139/ssrn.881562

Todd McFall (Contact Author)

Welch Consulting ( email )

1716 Briarcrest Rd.
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Charles R. Knoeber

North Carolina State University - Poole College of Management ( email )

Hillsborough Street
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United States
919-513-2874 (Phone)
919-515-7873 (Fax)

Walter N. Thurman

North Carolina State University ( email )

Hillsborough Street
Raleigh, NC 27695
United States

PERC - Property and Environment Research Center

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