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The persistence of disadvantages: Theory and experiment

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  • Sharma, Nishtha

Abstract

Many economic situations involve contests for resources, such as winning prizes and earning bonuses. The likelihood of success in such contests is often skewed, favoring some competitors while putting others at a disadvantage. I study the strategic interaction between an advantaged and a disadvantaged competitor in a repeated contest where winning can help overcome the initial disadvantage. Theoretically, both competitors increase their efforts, but the advantaged competitor increases effort by more than the disadvantaged competitor. As a result, the disadvantaged competitor becomes even less likely to win when overcoming their disadvantage is possible, implying that the initial disadvantage is persistent. Evidence from a laboratory experiment supports these theoretical predictions.

Suggested Citation

  • Sharma, Nishtha, 2026. "The persistence of disadvantages: Theory and experiment," Games and Economic Behavior, Elsevier, vol. 159(C), pages 329-392.
    • Handle: RePEc:eee:gamebe:v:159:y:2026:i:c:p:329-392
    DOI: 10.1016/j.geb.2026.06.005
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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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