![]() ![]() I also present results for a robust association between competing with a superstar and risk-taking, indicating that a dominant superstar decreases risk-taking. ![]() Reduced dominance by the superstar, however, is found to result in a positive peer effect. For tournaments with a single and clearly dominant superstar team, I find a sizable and significant negative effect of superstar presence on effort of other competing teams. My results demonstrate that the effect of competing with a superstar on effort does depend on the level of superstar dominance and the number of dominant teams in the contest. To identify the effect, I exploit exogenous variation in superstar dominance, induced by an institutional reform. In particular, I use novel data from top-level professional basketball to investigate the consequences of superstar presence on effort and risk-taking of teams in rank-order contests. I investigate how the presence of a dominant competitor or superstar does affect the decisions of other competitors in team contests. Heterogeneity in ability is critical for the effectiveness of different tournament designs. Competition is often observed between heterogenous teams.
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