The Impact of Advice on Selection into Competition

Abstract

We conduct a laboratory experiment, in which subjects decide whether to enter a tournament, in which they have to perform a real effort task. In one treatment subjects receive advice on whether to participate in the tournament. Advice is given by subjects who have already had some experience with the same decision and have some informational advantage. We show that advice significantly improves the entry decision of subjects. The total costs of wrong entry decisions go significantly down and the payoffs of those who receive advice go up. This is mainly driven by the fact that high ability women enter the tournament significantly more often while low ability men enter significantly less often. Though the gender gap in tournament entry is reduced, it still persists. Overall, advice given tends to be ‘good’ advice. Finally, we find that women are slightly more hesitant than men to advice entry into tournament.