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Bounded rationality and group size in Tullock contests: Experimental evidence

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  • Lim, Wooyoung
  • Matros, Alexander
  • Turocy, Theodore L.

Abstract

We explore how models of boundedly rational decision-making in games can explain the overdissipation of rents in laboratory Tullock contest games. Using a new series of experiments in which group size is varied across sessions, we find that models based on logit choice organize the data well. In this setting, logit quantal response equilibrium (QRE) is a limit of a cognitive hierarchy (CH) model with logit best responses for appropriate parameters. While QRE captures the data well, the CH fits provide support for relaxing the equilibrium assumption. Both the QRE and CH models have parameters which capture boundedness of rationality. The maximum likelihood fits of both models yield parameters indicating rationality is more restricted as group size grows. Period-by-period adjustments of expenditures are more likely to be in the earnings-improving direction in smaller groups.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 99 (2014)
Issue (Month): C ()
Pages: 155-167

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Handle: RePEc:eee:jeborg:v:99:y:2014:i:c:p:155-167

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Web page: http://www.elsevier.com/locate/jebo

Related research

Keywords: Contests; Rent-seeking; Laboratory experiments; Bounded rationality;

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Cited by:
  1. Subhasish M. Chowdhury & Roman M. Sheremeta & Theodore L. Turocy, 2014. "Overbidding and overspreading in rent-seeking experiments: Cost structure and prize allocation rules," Working Papers 14-08, Chapman University, Economic Science Institute.

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