Firms and Markets Seminar
Providing rankings -in addition to individual performance- has been proven a powerful tool to enhance performance. However, the exact channel through which ranking feedback affects performance is still a matter of debate. A common practice is to add an ad hoc term to the utility function when rankings are made available. We here propose an alternative approach where additional information provided by rankings increases performance by allowing individuals to identify better technologies. Our model captures several features not encompassed in previous models. In particular, it accounts for (1) the persistence of the feedback effect in multiple rounds tournaments, (2) performance improvements all along the performance distribution, including the worse performers. We bring our model to data using a field experiment consisting of a tournament based on a series of four math tests taken by high school girls.