Picking Winners in Rounds of Elimination

Innovation and Economic Growth

Article Snapshot


Suzanne Scotchmer and Junjie Zhou


Working Paper, 2012


This paper considers how to choose the best group of workers or projects using rounds of elimination.

Policy Relevance

Agencies that eliminate an initial pool of projects or employees over time can predictably trade off costs and selection outcomes.

Main Points

  • Often employers or investors cannot perfectly observe the ability of a worker or the value of a project, though they may get clues over time. Examples:

    • Venture capital firms can’t tell how likely it is that a startup will succeed.
    • Universities can’t tell how likely it is that an assistant professor will be a productive researcher.
    • Pharmaceutical firms may not know for certain whether a drug will succeed in treating a human disease.
  • Funding many projects or hiring many workers, then defunding or firing some of them over time, is a good approach in these situations. When using rounds of elimination or (synonymously) tournaments to choose workers of projects, there are two major considerations:

    • The number of rounds.
    • How well a worker must perform in each round to continue to the next round.
  • Some rounds of elimination have memory, and performance in a previous round will influence the likelihood of passing a later round; for example, academic advancement is a process with memory. Other elimination schemes do not have memory and performance in previous rounds is irrelevant; consider sport tournaments with elimination. Each game is won on the basis of points scored within the game without regard to how each team scored in previous games.
  • For any given number of survivors, one round of elimination produces a survivor pool with higher ability or value than a pool of the same size that survived two rounds.
  • In multi-round tournaments, average ability or value among a given number of survivors is higher when memory is used.
  • When keeping candidates for multiple rounds of elimination is more costly, earlier rounds should eliminate more workers. Even with this adjustment, costly tournaments will produce survivors with lower average ability or value.
  • When an elimination tournament has multiple rounds without memory, earlier rounds should eliminate more participants.

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