Strategic Reciprocity in a Contest with Large Stakes

Using the unique properties of a German TV game show, we analyze the extent and implications of strategic reciprocity in sequential performance evaluations in a contest with large stakes. The sequential order of performances implies that the scope for strategic reciprocity differs systematically between participants: Contestants that perform later in the sequence evaluate their rivals before they are evaluated themselves, which creates incentives for strategic reciprocity. We find that earlier contestants benefit from this effect, resulting in a substantial negative sequence order bias. We provide estimates for the change in winning probabilities and for the financial implications of this bias.