We conduct a contest experiment where participants can invest in increasing both the mean and the spread of an … uncertain performance variable. Subjects are treated with different prize schemes and in accordance with theory we observe …

effects on product market competition. We test their model in a duopoly experiment under both, Bertrand and Cournot … competition. We find that leverage has strategic effects, but those effects are much weaker than predicted by theory. Specifically … predicted by theory. It appears that subjects recognize the strategic effects of their own debt. However, they do not (want to …