Effect of social information on competition choice

We show that social information about competition choices influences individuals’ willingness to compete. In a laboratory experiment, participants perform a real-effort task under piece-rate and tournament incentives, and subsequently participate in two choice rounds. We vary the information provided between the two choice rounds across three treatments. We find that social information on the proportion of participants that choose to compete in the first round affects the willingness to compete in the second round. Salience of payment schemes does not explain this result. Observing a lower willingness to compete by others increases the likelihood of one’s own willingness to compete. This suggests that participants strategically choose to compete based on their treatment induced belief about the average ability of other participants, and this is consistent with predictions from a rational model of Bayesian learning. This effect is particularly strong for women.