Abstract
Outcomes of workplace competitions may themselves influence subsequent behavior—particularly if employees feel wronged. In a laboratory experiment, we find that—consistent with inequity aversion—tournament losers supply less postcompetition effort than winners when doing so reduces their tournament opponent's earnings. Consistent with procedural fairness concerns, subjects who lose arbitrarily decided tournaments that disregard tournament effort choices supply even less post‐tournament effort than other losers. While losers' effort reductions consistent with inequity aversion persist, effort reductions following arbitrarily decided tournaments fade over time. Finally, we show that effort reductions related to inequity aversion could potentially be mitigated through workplace rotations. (JEL C90, J30, D03)
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