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Resource Allocation Contests: Experimental Evidence

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  • David Schmidt

    (Federal Trade Commission, Bureau of Economics)

  • Robert S. Shupp

    ()
    (Department of Economics, Ball State University)

  • James Walker

    ()
    (Department of Economics, Indiana University, Bloomington, IN)

Abstract

Across many forms of rent seeking contests, the impact of risk aversion on equilibrium play is indeterminate. We design an experiment to compare individuals’ decisions across three contests which are isomorphic under risk-neutrality, but are typically not isomorphic under other risk preferences. The pattern of individual play across our contests is not consistent with a Bayes-Nash equilibrium for any distribution of risk preferences. We show that replacing the Bayes-Nash equilibrium concept with the quantal response equilibrium, along with heterogeneous risk preferences can produce equilibrium patterns of play that are very similar to the patterns we observe.

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File URL: http://econfac.iweb.bsu.edu/research/workingpapers/bsuecwp200506schmidt.pdf
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Bibliographic Info

Paper provided by Ball State University, Department of Economics in its series Working Papers with number 200506.

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Length: 34 pages
Date of creation: Feb 2005
Date of revision: Feb 2005
Handle: RePEc:bsu:wpaper:200506

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Keywords: rent seeking; experiments; risk aversion; game theory;

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