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Entry in contests with incomplete information: Theory and experiments

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  • Aycinena, Diego
  • Rentschler, Lucas

Abstract

This paper studies entry decisions in contests with private values. Potential contestants observe their value and the common opportunity cost of entry, and make entry decisions simultaneously. Theory predicts that whether or not contestants are informed of the number of entrants prior to choosing their expenditures has no effect on entry or aggregate expenditures. We test these assertions in our experiments. We find substantial over-entry in both information structures. However, entry is higher when contestants are informed. Since expenditures do not, on average, differ across information structures, aggregate expenditure is also higher when contestants are informed. Contestants earn on average less than the opportunity cost of entry.

Suggested Citation

  • Aycinena, Diego & Rentschler, Lucas, 2019. "Entry in contests with incomplete information: Theory and experiments," European Journal of Political Economy, Elsevier, vol. 60(C).
  • Handle: RePEc:eee:poleco:v:60:y:2019:i:c:s0176268017303890
    DOI: 10.1016/j.ejpoleco.2019.07.001
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    References listed on IDEAS

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    Cited by:

    1. Luke Boosey & Philip Brookins & Dmitry Ryvkin, 2020. "Entry in group contests," Working Papers wp2020_02_01, Department of Economics, Florida State University.

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    More about this item

    Keywords

    Contests; Endogenous entry; Experiments;
    All these keywords.

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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