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Information Feedback and Contest Structure in Rent-Seeking Games

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  • Francesco Fallucchi

    ()
    (School of Economics, University of Nottingham)

  • Elke Renner

    ()
    (School of Economics, University of Nottingham)

  • Martin Sefton

    ()
    (School of Economics, University of Nottingham)

Abstract

We investigate the role of information feedback in rent-seeking games with two different contest structures. In the stochastic contest a contestant wins the entire rent with probability equal to her share of rent-seeking expenditures; in the deterministic contest she receives a share of the rent equal to her share of rent-seeking expenditures. Information feedback has very different effects depending on the contest structure. We observe the highest rent dissipation in stochastic contests when players only get feedback on own choices and earnings. In these contests aggregate expenditures usually exceed the value of the rent. We find that giving additional feedback about rival's choices and earnings moderates average expenditures. In contrast, in deterministic contests average expenditures converge to equilibrium levels when subjects only get feedback about own choices and earnings. In these contests additional feedback about rival's choices and earnings has the opposite effect of raising average expenditures.

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Bibliographic Info

Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2012-12.

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Date of creation: Dec 2012
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Handle: RePEc:not:notcdx:2012-12

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Keywords: contests; rent-seeking; information; learning; imitation; experiments;

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Cited by:
  1. Robert Shupp & Roman M. Sheremeta & David Schmidt & James Walker, 2013. "Resource Allocation Contests: Experimental Evidence," Working Papers 13-23, Chapman University, Economic Science Institute.
  2. Steven Tucker & Charles Noussair & Roman M. Sheremeta, 2013. "Overbidding And Heterogeneous Behavior In Contest Experiments," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 491-514, 07.
  3. Chowdhury, Subhasish & Sheremeta, Roman & Turocy, Theodore, 2014. "Overbidding and overspreading in rent-seeking experiments: Cost structure and prize allocation rules," MPRA Paper 55922, University Library of Munich, Germany.
  4. 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.
  5. 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.

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