Based solely on the description of the experiment, I'm inclined to disagree with the conclusions. This experiment creates a situation where:
- Time is the sole differentiating factor (no points for sticking the candle on the wall 'really well',
- No opportunity to develop a skill (let me go learn about the nature of candle wax...).
- The difference between first and second place is pretty extreme.
In such a situation, yeah people are going to get a little frantic, and yeah it's going to negatively affect their performance.
How does this experiment say anything about real life, where people are motivated to increase their skills over time? Where people and organizations can choose each other based on a variety of factors -- including monetary compensation?
By the way, my SO rep is currently above 2700, which, while not remarkable, does demonstrate that I enjoy problem solving enough to do it for a pat on the back. While I'm willing to solve the problems I want to solve for free, I'll only solve the problems someone else wants to solve for money. And if the other guy is willing to compensate me better, all things being equal, I'm going to go solve that guy's problems.