Bad Losers? Bad Winners? The Effect of the Quality of Competitors on Dishonesty and Effort in Repeated Competitions

Competitive rewards are often assigned on a regular basis, e.g., in annual salary negotiations or employee-of-the-month schemes. In many settings, this implies that the quality of the competitor varies with earlier outcomes. Using a real-effort experiment, we examine how dishonesty and effort evolve in two rounds of competitions in which subjects are matched with different types of competitors in the second round (random/based on first round outcome). We find that (i) first round losers increase cheating in the second round while winners tend to reduce cheating. (ii) Individuals do not anticipate the possibility of a more difficult opponent. In line with expectations, winners increase reported points (sum of effort and cheating) when competing against another winner. This cannot be ascribed to an increase in cheating or effort alone.