DO WOMEN SHY AWAY FROM COMPETITION? DO MEN COMPETE TOO MUCH? Muriel Niederle and Lise Vesterlund February 21, 2006 Abstract We explore whether women and men differ in their selection into competitive environments. Participants perform a real task under a non-competitive piece rate and a competitive tournament scheme, and subsequently select which of the two they want to apply to future performances. Although there are no gender differences in performance, twice as many men as women choose the tournament over the piece rate. Performance cannot explain this tournament-entry gap. Instead it is explained by men being relatively more overconfident, and by gender differences in preferences for performing in a competition. Risk and feedback aversion play negligible roles. Muriel Niederle: Department of Economics, Stanford University and NBER, http://www.stanford.edu/~niederle, and Lise Vesterlund: Department of Economics, University of Pittsburgh, http://www.pitt.edu/~vester. We thank Scott Kinross, who conducted all the experiments reported in this paper, for his excellent research assistance. We also thank Liran Einav, Jean Francois Richard, Al Roth and Carmit Segal for comments, and we are grateful to the NSF for generous support.1I. INTRODUCTION A series of psychology studies suggest that males are more competitive than females. While boys spend most of their time at competitive games, girls select activities where there is no winner and no clear end point. This difference increases through puberty, and by adulthood more men than women describe themselves as competitive (see Campbell, 2002, for a review of the literature). If gender differences in competitive attitudes cause men and women to select different jobs then it may have substantial impacts on labor market outcomes. The objective of this paper is to investigate if, when holding other job characteristics constant, men and women differ in the type of compensation they prefer to receive for their work. Specifically we examine if more women than men prefer to work under a non-competitive piece rate than under a competitive tournament compensation. A natural explanation for potential gender differences in compensation choices may be ability differences. If men perform better in competitive environments than women, then we would expect them to make different choices.1 Thus from an economic perspective the question of interest is not simply whether compensation choices differ by gender, but whether they differ for equally able men and women. Finding that compensation choices differ conditional on performance may help explain why so few women hold competitive high profile jobs. Bertrand and Hallock (2001) find that only 2.5 percent of the five highest paid executives in a large data set of U.S. firms are women. Ability differences can only account for part of this occupational difference and common explanations for the remaining difference include preferences and discrimination. Women may not select into top level jobs because they do not enjoy the responsibilities associated with a managerial position. Or they may avoid these jobs because they tend to have long work hours, which may conflict with the desire or necessity for child rearing. Second, discrimination or anticipated discrimination may cause women and men with equal abilities to hold different occupations.2 Our study helps determine if gender differences in competitive attitudes may be yet another explanation for the absence of women in top level positions. Using experimental 1 Gneezy, Niederle and Rustichini [2003] examine gender differences in competitive behaviors and find that when solving mazes there is no gender difference in performance under the piece rate, but men outperform women in winner-take-all competitions. See also Gneezy and Rustichini [2004] and Larson [2005]. 2 See Black and Strahan [2001], Goldin and Rouse [2000], Altonji and Blank [1999] and references therein.2methods we examine individual choices between competitive and non-competitive compensations in a non-discriminatory environment, where we can control for ability differences and secure that the workload is the same under both compensations. Thus we investigate whether men and women on a level playing field are equally likely to enter a competitive tournament. If women are less likely to compete, this not only reduces the number of women who enter tournaments, but also those who win tournaments. Hence it decreases the chances of women succeeding in competition for promotions and more lucrative jobs. To determine whether there is a gender difference in compensation choices we have groups of 2 women and 2 men perform a real task, namely adding up sets of five two-digit numbers for five minutes.3 Participants first perform the task under a piece-rate compensation and then under a tournament. While they are informed of their absolute performance after each task, they do not receive any feedback on their relative performance. Having experienced both compensations, participants then choose which of the two they want to apply to their performance of the next task, either a piece rate or a tournament. Despite there being no gender difference in performance under either compensation we find that twice as many men as women select the tournament. While 73% of men prefer the tournament this choice is only made by 35% of the women. Performance cannot explain this gender difference and is generally a poor predictor of the participant’s tournament-entry decision. Thus, men and women with equal performance differ in their compensation choices. While low ability men enter the tournament too much, high ability women do not enter it enough. We consider a number of possible explanations to understand what may give rise to such gender differences in tournament entry. One explanation is simply that preferences for performing in a competitive environment differ across genders. Other more general explanations are that women may be more reluctant to enter the tournament if they are less confident in their relative ability, more averse to risk, or if they are more reluctant to be in environment where they receive feedback on their relative performance. We determine the extent to which these potential differences can explain the gender gap in tournament entry. 3 To determine the cause of possible gender differences in compensation choice (between a competitive and a non-competitive