Endogenous entry in contests

Abstract

We report the results of laboratory experiments on rent-seeking contests with endogenous participation. Theory predicts that (a) contest entry and rent-seeking expenditures increase with the size of the prize and (b) earnings are equalized between the contest and the outside option. While the directional predictions offered in (a) are supported in the data, the level predictions are not. Prediction (b) is not supported in the data: when the prize is large, contest participants earn more than the outside option. When the prize is small, contest participants earn less. Previous studies of gender and contest competition suggest that females should (a) not perform as well in the contest; and (b) enter at a lower rate. We find some support for (a) but not for (b). Women participate in the contest at the same rate as men.

When parity promotes peace: Resolving conflict between asymmetric agents

“…given that many earlier experiments have documented very high costs of conflict (Davis and Reilly, 1998;Potters et al, 1998;Fonseca, 2009;Sheremeta, 2010Sheremeta, , 2011Cason et al, 2012Cason et al, , 2013Morgan et al, 2012). Indeed, the same pattern emerges in our experiment.…”

Endowment effects in contests

“…This participation fee can be used to pay off any losses incurred during the series of contests. The P protocol has been used by Potters et al (1998), Anderson and Stafford (2003), Morgan et al (2008), and Sheremeta and Zhang (2009). Under the P protocol, each subject receives a small per-period endowment which can be used to make bids in that period of the experiment.…”

“…It is well documented in experimental contest literature that subjects overbid relative to Nash equilibrium predictions and thus they incur substantial losses (Morgan et al, 2008). A number of studies have tried to identify means by which overbidding can be reduced.…”

War and conflict in economics: Theories, applications, and recent trends

“…Most laboratory studies also find support for the main predictions of the theory, such as the incentive effect (Bull et al, 1987;Van Dijk et al, 2001), the size effect (Gneezy and Smorodinsky, 2006;Sheremeta, 2011;Morgan et al, 2012) and the discouragement effect (Davis and Reilly, 1998;Fonseca, 2009). However, experimental studies also uncovered a number of important phenomena which are not predicted by the theory.…”