When one person's performance is judged relative to the performance of other people and not by an absolute standard,
A) players will over invest in performance enhancements.
B) players will under invest in performance enhancements.
C) the incentive to sabotage the other players is lessened.
D) a positional externality is not possible.
E) the incentive to "play fair" is maximized.

Question

Quizplus · Accepted Answer

When performance is judged relative to others, individuals may over invest in performance enhancements to gain a competitive edge, leading to a positional externality.

When One Person's Performance Is Judged Relative to the Performance