Why Rivalry Isn't Rational

People often will act against their own self interests—if it means they’ll outperform their rivals as a result.

Why Rivalry Isn't Rational

"HOW DO INDIVIDUALS factor in the impact of their decisions upon others, if at all?" ask Jeffrey P. Thomas of the London School of Economics and Political Science in the U.K. and Pablo Schiaffino of the department of history and social studies at Universidad Torcuato Di Tell a in Buenos Aires, Argentina. In a working paper, the pair examines the reasons why individuals accept worse outcomes for themselves in order to competeand ideally winagainst their rivals.

If people were rational actors, they would seek only to "maximize their absolute outcomes," the co-authors explain. But when people are up against rivals, a trait called social value orientation comes into play. They accept worse outcomes for themselves to prevent competitors from receiving better ones.

"Rivals will be apt to turn any interaction into an opportunity for comparison and competition," the researchers write. "By contrast, nonrivals will be more likely to operate in line with the rational actor model."

In the first of three studies, the researchers focused on the country-level rivalry between Argentina and Brazil during the 2014 Federation Internationale de Football Association World Cup. Argentinian participants were told that they each would be matched with another participant. In the rivalry condition, they were told they were matched with Brazilians, whose team is a historical rival to Argentina in the World Cup; in the nonrivalry condition, participants were told they were matched with Croatians.

Next, they were asked to complete a simple task and choose how much both they and their partners would earn for each correct answer. Participants in both groups could choose Option A, 0.8 pesos for their partners and 1.0 pesos for themselves, or Option B, 1.6 pesos for their partners and 1.2 pesos for themselves. In this study, the Argentinian participants who believed they were competing against Brazilians were more likely to choose lower-paying Option A than those in the nonrivalry condition.

In another study, Thomas and Schiaffino looked at individual-level rivalries. They asked participants to imagine competing against either a rival or nonrival at work under one of two conditionseither Option A, which offered a 75 percent chance of winning a US$100 bonus, or Option B, which offered a 25 percent chance of winning a $600 bonus. Those who imagined competing against a rival were more likely to choose the potentially lower payout of Option A.

"Rivalry can lead to suboptimal decisions, with people acting in ways counter to their financial self-interest in order to outearn, or have the opportunity to outperform, their rivals," the co-authors write. "This may help explain a range of hyper-competitive behaviors seen in businessprice wars, sabotage, overbidding in acquisition battlesthat from the outside appear irrational."

The authors call for further study into, among other topics, whether competing with rivals offers psychological rewards to individuals that outweigh any personal losses incurred as a result.

Read "To Win or to Profit: How Rivalry Affects Payoff Decisions in Interdependent Situations."

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