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Varying the intensity of competition in a multiple prize rent seeking experiment

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  • Lisa Anderson
  • Beth Freeborn

Abstract

We experimentally test a rent seeking model under five levels of competition. At one extreme, a subject’s probability of winning a prize is equal to her share of the total expenditures. At lower levels of competition, a subject’s probability of winning is affected more by her own expenditures than by the expenditures of others. Predicted expenditure levels are positively associated with higher levels of competition. Consistent with previous rent seeking experiments, we find that subjects spend significantly more than the Nash equilibrium prediction at all levels of competition. However, expenditure patterns generally follow the Nash prediction; expenditures decrease as the level of competition decreases. Our experimental design also includes a lottery choice experiment to control for subjects’ risk preference. We find that subjects who are more risk averse spend significantly less in the contest and this effect is particularly strong for female subjects
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Suggested Citation

  • Lisa Anderson & Beth Freeborn, 2010. "Varying the intensity of competition in a multiple prize rent seeking experiment," Public Choice, Springer, vol. 143(1), pages 237-254, April.
    • Handle: RePEc:kap:pubcho:v:143:y:2010:i:1:p:237-254
    DOI: 10.1007/s11127-009-9482-3
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    More about this item

    Keywords

    Rent seeking; Experiment; Rent dissipation; Political competition; C91; D72;
    All these keywords.

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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