IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v64y2013icp223-240.html
   My bibliography  Save this article

Information feedback and contest structure in rent-seeking games

Author

Listed:
  • Fallucchi, Francesco
  • Renner, Elke
  • Sefton, Martin

Abstract

We investigate the effects of information feedback in rent-seeking games with two different contest structures. In the share contest a contestant receives a share of the rent equal to her share of rent-seeking expenditures, while in the lottery contest a contestant wins the entire rent with probability equal to her share of rent-seeking expenditures. In share contests average expenditures converge to equilibrium levels when subjects only get feedback about own earnings, and additional feedback about rivals' choices and earnings raises average expenditures. In lottery contests information feedback has an opposite, and even stronger, effect: when subjects only get feedback on own earnings we observe high levels of rent dissipation, usually exceeding the value of the rent, and additional feedback about rivals' choices and earnings has a significant moderating influence on expenditures. In a follow-up treatment we make information feedback endogenous by allowing contestants in a lottery contest to make public or private expenditures. Subjects make the vast majority of expenditures privately and overall excess expenditures are similar to the lottery contest with own feedback.

Suggested Citation

  • Fallucchi, Francesco & Renner, Elke & Sefton, Martin, 2013. "Information feedback and contest structure in rent-seeking games," European Economic Review, Elsevier, vol. 64(C), pages 223-240.
    • Handle: RePEc:eee:eecrev:v:64:y:2013:i:c:p:223-240
    DOI: 10.1016/j.euroecorev.2013.09.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014292113001219
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.euroecorev.2013.09.003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Apesteguia, Jose & Huck, Steffen & Oechssler, Jorg, 2007. "Imitation--theory and experimental evidence," Journal of Economic Theory, Elsevier, vol. 136(1), pages 217-235, September.
    2. Theo Offerman & Jan Potters & Joep Sonnemans, 2002. "Imitation and Belief Learning in an Oligopoly Experiment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 973-997.
    3. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2000. "Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 39-57, January.
    4. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603.
    5. Shupp, Robert & Sheremeta, Roman M. & Schmidt, David & Walker, James, 2013. "Resource allocation contests: Experimental evidence," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 257-267.
    6. Klaus Abbink & Jordi Brandts & Benedikt Herrmann & Henrik Orzen, 2010. "Intergroup Conflict and Intra-group Punishment in an Experimental Contest Game," American Economic Review, American Economic Association, vol. 100(1), pages 420-447, March.
    7. Cason, Timothy N. & Masters, William A. & Sheremeta, Roman M., 2010. "Entry into winner-take-all and proportional-prize contests: An experimental study," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 604-611, October.
    8. Shakun D. Mago & Anya C. Savikhin & Roman M. Sheremeta, 2012. "Facing Your Opponents: Social identification and information feedback in contests," Working Papers 12-15, Chapman University, Economic Science Institute.
    9. Sheremeta, Roman M., 2010. "Experimental comparison of multi-stage and one-stage contests," Games and Economic Behavior, Elsevier, vol. 68(2), pages 731-747, March.
    10. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
    11. Faravelli, Marco & Stanca, Luca, 2012. "When less is more: Rationing and rent dissipation in stochastic contests," Games and Economic Behavior, Elsevier, vol. 74(1), pages 170-183.
    12. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 1999. "Learning in Cournot Oligopoly--An Experiment," Economic Journal, Royal Economic Society, vol. 109(454), pages 80-95, March.
    13. Subhasish M. Chowdhury & Roman M. Sheremeta & Theodore L. Turocy, 2012. "Overdissipation and Convergence in Rent-seeking Experiments: Cost structure and prize allocation rules," Working Papers 12-13, Chapman University, Economic Science Institute.
    14. Potters, Jan & de Vries, Casper G. & van Winden, Frans, 1998. "An experimental examination of rational rent-seeking," European Journal of Political Economy, Elsevier, vol. 14(4), pages 783-800, November.
    15. Jason F. Shogren & Kyung H. Baik, 2008. "Reexamining efficient rent-seeking in laboratory markets," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 651-661, Springer.
    16. Roman M. Sheremeta, 2011. "Contest Design: An Experimental Investigation," Economic Inquiry, Western Economic Association International, vol. 49(2), pages 573-590, April.
    17. Reinhard Selten & Klaus Abbink & Ricarda Cox, 2005. "Learning Direction Theory and the Winner’s Curse," Experimental Economics, Springer;Economic Science Association, vol. 8(1), pages 5-20, April.
    18. Apesteguia, Jose & Huck, Steffen & Oechssler, Jörg & Weidenholzer, Simon, 2010. "Imitation and the evolution of Walrasian behavior: Theoretically fragile but behaviorally robust," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1603-1617, September.
    19. Kirchsteiger, Georg & Niederle, Muriel & Potters, Jan, 2005. "Endogenizing market institutions: An experimental approach," European Economic Review, Elsevier, vol. 49(7), pages 1827-1853, October.
    20. Benedikt Herrmann & Henrik Orzen, 2008. "The appearance of homo rivalis: Social preferences and the nature of rent seeking," Discussion Papers 2008-10, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    21. Cason, Timothy N. & Sheremeta, Roman M. & Zhang, Jingjing, 2012. "Communication and efficiency in competitive coordination games," Games and Economic Behavior, Elsevier, vol. 76(1), pages 26-43.
    22. Davis, Douglas D & Holt, Charles A, 1998. "Conspiracies and Secret Discounts in Laboratory Markets," Economic Journal, Royal Economic Society, vol. 108(448), pages 736-756, May.
    23. Roman M. Sheremeta, 2013. "Overbidding And Heterogeneous Behavior In Contest Experiments," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 491-514, July.
    24. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    25. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
    26. Price, Curtis R. & Sheremeta, Roman M., 2011. "Endowment effects in contests," Economics Letters, Elsevier, vol. 111(3), pages 217-219, June.
    27. Cason, Timothy N. & Masters, William A. & Sheremeta, Roman M., 2020. "Winner-take-all and proportional-prize contests: Theory and experimental results," Journal of Economic Behavior & Organization, Elsevier, vol. 175(C), pages 314-327.
    28. Roman Sheremeta & Jingjing Zhang, 2010. "Can groups solve the problem of over-bidding in contests?," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 35(2), pages 175-197, July.
    29. Edward Millner & Michael Pratt, 1989. "An experimental investigation of efficient rent-seeking," Public Choice, Springer, vol. 62(2), pages 139-151, August.
    30. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    31. Pamela Schmitt & Robert Shupp & Kurtis Swope & John Cadigan, 2004. "Multi-period rent-seeking contests with carryover: Theory and experimental evidence," Economics of Governance, Springer, vol. 5(3), pages 187-211, November.
    32. Brookins, Philip & Lightle, John P. & Ryvkin, Dmitry, 2015. "An experimental study of sorting in group contests," Labour Economics, Elsevier, vol. 35(C), pages 16-25.
    33. R. D. Theocharis, 1960. "On the Stability of the Cournot Solution on the Oligopoly Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 27(2), pages 133-134.
    34. Fonseca, Miguel A., 2009. "An experimental investigation of asymmetric contests," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 582-591, September.
    35. Millner, Edward L & Pratt, Michael D, 1991. "Risk Aversion and Rent-Seeking: An Extension and Some Experimental Evidence," Public Choice, Springer, vol. 69(1), pages 81-92, February.
    36. Franklin M. Fisher, 1961. "The Stability of the Cournot Oligopoly Solution: The Effects of Speeds of Adjustment and Increasing Marginal Costs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 28(2), pages 125-135.
    37. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
    38. Roman Sheremeta & Jingjing Zhang, 2010. "Can groups solve the problem of over-bidding in contests?," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 35(2), pages 175-197, July.
    39. Xiaojing Kong, 2008. "Loss Aversion and Rent-Seeking: An Experimental Study," Discussion Papers 2008-13, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    40. Reinhard Selten & Klaus Abbink & Ricarda Cox, 2005. "Learning Direction Theory and the Winner’s Curse," Experimental Economics, Springer;Economic Science Association, vol. 8(1), pages 5-20, April.
    41. Lim, Wooyoung & Matros, Alexander & Turocy, Theodore L., 2014. "Bounded rationality and group size in Tullock contests: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 99(C), pages 155-167.
    42. Konrad, Kai A & Schlesinger, Harris, 1997. "Risk Aversion in Rent-Seeking and Rent-Augmenting Games," Economic Journal, Royal Economic Society, vol. 107(445), pages 1671-1683, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roman M. Sheremeta, 2013. "Overbidding And Heterogeneous Behavior In Contest Experiments," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 491-514, July.
    2. Francesco Fallucchi & Jan Niederreiter & Massimo Riccaboni, 2021. "Learning and dropout in contests: an experimental approach," Theory and Decision, Springer, vol. 90(2), pages 245-278, March.
    3. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    4. Subhasish M. Chowdhury & Anwesha Mukherjee & Theodore L. Turocy, 2020. "That’s the ticket: explicit lottery randomisation and learning in Tullock contests," Theory and Decision, Springer, vol. 88(3), pages 405-429, April.
    5. Shupp, Robert & Sheremeta, Roman M. & Schmidt, David & Walker, James, 2013. "Resource allocation contests: Experimental evidence," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 257-267.
    6. Chowdhury, Subhasish M. & Sheremeta, Roman M. & Turocy, Theodore L., 2014. "Overbidding and overspreading in rent-seeking experiments: Cost structure and prize allocation rules," Games and Economic Behavior, Elsevier, vol. 87(C), pages 224-238.
    7. Hoffmann, Magnus & Kolmar, Martin, 2017. "Distributional preferences in probabilistic and share contests," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 120-139.
    8. Philip Brookins & Dmitry Ryvkin, 2014. "An experimental study of bidding in contests of incomplete information," Experimental Economics, Springer;Economic Science Association, vol. 17(2), pages 245-261, June.
    9. Sheremeta, Roman, 2014. "Behavior in Contests," MPRA Paper 57451, University Library of Munich, Germany.
    10. David Bruner & Caleb Cox & David M. McEvoy & Brock Stoddard, 2022. "Strategic thinking in contests," Experimental Economics, Springer;Economic Science Association, vol. 25(3), pages 942-973, June.
    11. Mago, Shakun D. & Sheremeta, Roman M. & Yates, Andrew, 2013. "Best-of-three contest experiments: Strategic versus psychological momentum," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 287-296.
    12. Sheremeta, Roman, 2014. "Behavioral Dimensions of Contests," MPRA Paper 57751, University Library of Munich, Germany.
    13. Roman Sheremeta, 2018. "Experimental Research on Contests," Working Papers 18-07, Chapman University, Economic Science Institute.
    14. Cason, Timothy N. & Masters, William A. & Sheremeta, Roman M., 2020. "Winner-take-all and proportional-prize contests: Theory and experimental results," Journal of Economic Behavior & Organization, Elsevier, vol. 175(C), pages 314-327.
    15. Roman M. Sheremeta, 2018. "Behavior In Group Contests: A Review Of Experimental Research," Journal of Economic Surveys, Wiley Blackwell, vol. 32(3), pages 683-704, July.
    16. Subhasish M. Chowdhury & Roman M. Sheremeta & Theodore L. Turocy, 2012. "Overdissipation and Convergence in Rent-seeking Experiments: Cost structure and prize allocation rules," Working Papers 12-13, Chapman University, Economic Science Institute.
    17. Sara Godoy & Miguel Meléndez-Jiménez & Antonio Morales, 2015. "No fight, no loss: underinvestment in experimental contest games," Economics of Governance, Springer, vol. 16(1), pages 53-72, February.
    18. Llorente-Saguer, Aniol & Sheremeta, Roman M. & Szech, Nora, 2023. "Designing contests between heterogeneous contestants: An experimental study of tie-breaks and bid-caps in all-pay auctions," European Economic Review, Elsevier, vol. 154(C).
    19. Changxia Ke & Kai A. Konrad & Florian Morath, 2015. "Alliances In The Shadow Of Conflict," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 854-871, April.
    20. Roman M. Sheremeta, 2016. "Impulsive Behavior in Competition: Testing Theories of Overbidding in Rent-Seeking Contests," Working Papers 16-21, Chapman University, Economic Science Institute.

    More about this item

    Keywords

    Contests; Rent-seeking; Information feedback; Learning; Experiments;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:64:y:2013:i:c:p:223-240. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eer .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.