IDEAS home Printed from https://ideas.repec.org/a/spr/reecde/v27y2023i4d10.1007_s10058-022-00318-2.html
   My bibliography  Save this article

Contests with entry fees: theory and evidence

Author

Listed:
  • John Duffy

    (University of California, Irvine)

  • Alexander Matros

    (University of South Carolina and Lancaster University Management School)

  • Zehra Valencia

    (Health Care Cost Institute)

Abstract

We provide some theory and experimental evidence on contests with entry fees. In our setup, players must simultaneously decide whether or not to pay a fee to enter a contest and the amount they wish to bid should they choose to enter the contest. In a general n-bidder game, we show that the addition of contest entry fees increases the contest designer’s expected revenue and that there is a unique revenue maximizing entry fee. In an experimental test of this theory we vary both the entry fee and the number of bidders. We find over-bidding for all entry fees and bidder group sizes, n. We also find under-participation in the contest for low entry fees and over-participation for higher entry fees. In the case of 3 bidders, the revenue maximizing entry fee for the contest designer is found to be significantly greater than the theoretically optimal entry fee. We offer some possible explanations for these departures from theoretical predictions.

Suggested Citation

  • John Duffy & Alexander Matros & Zehra Valencia, 2023. "Contests with entry fees: theory and evidence," Review of Economic Design, Springer;Society for Economic Design, vol. 27(4), pages 725-761, December.
    • Handle: RePEc:spr:reecde:v:27:y:2023:i:4:d:10.1007_s10058-022-00318-2
    DOI: 10.1007/s10058-022-00318-2
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10058-022-00318-2
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10058-022-00318-2?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 search for a different version of it.

    More about this item

    Keywords

    Contests; Entry fees; Experimental economics;
    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:spr:reecde:v:27:y:2023:i:4:d:10.1007_s10058-022-00318-2. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.