Diana Puca | 22.01.

2015

Asymmetric Tournaments, Equal

Opportunity Laws and Affirmative
Action: Some Experimental Results
Andrew Schotter and Keith Weigelt (1992)

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Contents:

Paper Summary

Types of Tournaments
Theoretical Model
Experimental Design
Results
Conclusions

Questions and discussion

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Paper Summary
Ways of dealing with inequity on the labour market:
Equal opportunity laws: policies which prevent discrimination
of employee groups
Affirmative action programs: hiring and promotion policies
which favour historically disadvantaged minorities (females,
ethnic minorities, etc.); a form of positive discrimination
Main research questions :

How do these initiatives influence effort levels and overall firm

performance?

Is there a trade-off between equity and efficiency?

The researchers model these laws as rank order tournaments and

study them through lab experiments.

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Types of Tournaments
Symmetrical agents are identical and treated equally by the
tournament rules

Asymmetrical:
Uneven agents have different ability levels (i.e. different effort cost
functions) targeted by affirmative action programs
Unfair agents are identical, but the tournament rules favour one of
them (the performance of the disadvantaged agent must exceed the
performance of the other by a k>0 in order to win) targeted by
equal opportunity laws
Equal opportunity laws remove unfair rules

symmetrical tournaments

Affirmative action programs induce an unfair tournament; in order to

compensate the disadvantaged agent for their higher cost of effort, they
bend the rules in their favour uneven and unfair tournaments

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Theoretical Model
Utility functions for agents i and j:
Generated output:

Payment to agent i:

General equilibrium:

Symmetric tournament equilibrium:

Unfair tournament equilibrium:

Uneven tournament equilibrium:

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Experimental Design
Subjects economics students of New York University
Each randomly chooses 20 envelopes out of 1000 - random numbers
(from a uniform distribution over [-60, 60], corresponding to the
shocks to productivity)
Pairs of two subjects are formed randomly (physical identity hidden)
Written instructions, payoff sheets and cost of effort functions are
provided (all parameters are common knowledge)
Subjects pick a number between 0 and 100 (decision number
equivalent to effort)
Afterwards, they open an envelope and add that number to their
decision number to get their total number for the round
After each round they are informed who had the biggest total number
and receive their respective payments (prize-cost of number chosen)

After 20 identical rounds, the subjects received their final cumulative

payoff (between $7 and $24)

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Experimental Design
In the case of the unfair tournament, one subject had to realise an
output k units higher in order to win. K was known to both.
For uneven tournaments, there was an > 1 for one subject, but
known to both.
Attention to language: higher number subject instead of
winner; M and m were called fixed payments instead of
prizes

Reason: to deemphasize the game-like nature of the experiement and

draw attention to payoffs only, not to the satisfaction of being the
winner
Each subject participated in only one treatment
20 rounds instead of a one-shot experiment to allow for learning
curves since the task was complex. Results of the last 10 rounds are
considered.

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Experimental Design

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Symmetric Tournaments

Behavior is consistent
with the predictions.
Predicted effort: 73.75
Observed effort
(rounds 11-20): 77.91

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Unfair Tournaments

Experiment 2

Experiment 3

Advantaged

Disadvantaged

Advantaged

Disadvantaged

Predicted effort

58.39

58.39

46.09

46.09

Observed effort

74.5

58.65

48.65

59.29

Predicted prob. of winning

0.687

0.805

Observed prob. of winning

0.898

0.827

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Uneven Tournaments

Experiment 4

Experiment 5

Advantaged

Disadvantaged

Advantaged

Disadvantaged

Predicted effort

74.51

37.26

76.06

19.02

Observed effort

78.83

37.06

77.33

18.47

Predicted prob. of winning

0.762

0.805

Observed prob. of winning

0.788

0.827

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Dropping Out vs. Oversupply of Effort

More than half of

the disadvantaged
subjects in
experiment 5
dropped out (chose
effort levels < 6). By
contrast, those who
didnt drop out
chose levels above
those predicted
(30.2 vs. 18.5)

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Equal Opportunity Laws

Equal opportunity laws

increase the probability
of winning and the
payoff of disadvantaged
subjects.
They also increase total
tournament output and
therefore the firms
profit.

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Affirmative Action
Low ability (effort cost)
difference: effort levels
fall for advantaged
subjects and stay the
same for the
disadvantaged. Total
output is lower. Probability
of winning and expected
payoff of the discriminated
group go up.
High ability (effort cost)
difference :
Dropout behavior is
eliminated, effort levels
and total tournament
output go up.

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Conclusions
Main findings:

Both affirmative action and equal opportunity laws benefit disadvantaged

groups by increasing their probability of winning the big prize and by raising
their total payoff.

Equal opportunity laws increase the effort levels of all agents, generating
higher profits for the firm.

Affirmative action programs increase effort levels and firm profits only in
cases of severe initial cost disadvantages of one agent. If the cost diferences
are small, these programs might create efficiency losses for the firm.

Behaviour is generally consistent with the theoretical prediction, except for

the oversupply of effort => possible topic for further research.

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Assymetric Tournaments, Equal Opportunity Laws and Affirmative Action : Some Experimental Results| 22.01.2015

Questions / Discussion
Question:
Why are affirmative action programs especially effective in the
cases where there is a severe cost disadvantage of one
group/agent?
Answer:

When an agent is significantly cost disadvantaged, they will have

a strong incentive to drop out and not supply any effort at all. In
this case, the intervention of affirmative action levels the playing
field and prevents the drop out behavior, thus greatly increasing
effort and output. When there is only a minor degree of cost
asymmetry, drop out behavior is rare and the benefit of
affirmative action is much smaller.

Thank you for your attention!