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Varying the Intensity of Competition in a Multiple Prize Rent Seeking Experiment

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  • Lisa R. Anderson

    () (Department of Economics, College of William and Mary)

  • Beth A. Freeborn

    () (Department of Economics, College of William and Mary)

Abstract

We experimentally test a rent seeking model under five levels of competition. At one extreme, a subject’s probability of winning a prize is equal to her share of the total expenditures. At lower levels of competition, a subject’s probability of winning is affected more by her own expenditures than by the expenditures of others. Predicted expenditure levels are positively associated with higher levels of competition. Consistent with previous rent seeking experiments, we find that subjects spend significantly more than the Nash equilibrium prediction at all levels of competition. However, expenditure patterns generally follow the Nash prediction; expenditures decrease as the level of competition decreases. Our experimental design also includes a lottery choice experiment to control for subjects’ risk preference. We find that subjects who are more risk averse spend significantly less in the contest and this effect is particularly strong for female subjects

Suggested Citation

  • Lisa R. Anderson & Beth A. Freeborn, 2008. "Varying the Intensity of Competition in a Multiple Prize Rent Seeking Experiment," Working Papers 75, Department of Economics, College of William and Mary.
  • Handle: RePEc:cwm:wpaper:75
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    References listed on IDEAS

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    Cited by:

    1. Deck, Cary & Kimbrough, Erik O., 2015. "Single- and double-elimination all-pay tournaments," Journal of Economic Behavior & Organization, Elsevier, pages 416-429.
    2. Roman M. Sheremeta, 2014. "Behavioral Dimensions of Contests," Working Papers 14-14, Chapman University, Economic Science Institute.
    3. Antonio Filippin & Paolo Crosetto, 2016. "A Reconsideration of Gender Differences in Risk Attitudes," Management Science, INFORMS, pages 3138-3160.
    4. March, Christoph & Sahm, Marco, 2017. "Asymmetric discouragement in asymmetric contests," Economics Letters, Elsevier, vol. 151(C), pages 23-27.
    5. Mago, Shakun D. & Sheremeta, Roman M. & Yates, Andrew, 2013. "Best-of-three contest experiments: Strategic versus psychological momentum," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 287-296.
    6. repec:eee:joepsy:v:63:y:2017:i:c:p:216-229 is not listed on IDEAS
    7. Kimbrough, Erik O. & Sheremeta, Roman M. & Shields, Timothy W., 2014. "When parity promotes peace: Resolving conflict between asymmetric agents," Journal of Economic Behavior & Organization, Elsevier, pages 96-108.
    8. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    9. Sheremeta, Roman, 2014. "Behavior in Contests," MPRA Paper 57451, University Library of Munich, Germany.
    10. Chowdhury, Subhasish M. & Sheremeta, Roman M. & Turocy, Theodore L., 2014. "Overbidding and overspreading in rent-seeking experiments: Cost structure and prize allocation rules," Games and Economic Behavior, Elsevier, vol. 87(C), pages 224-238.
    11. Hargreaves Heap, Shaun P. & Ramalingam, Abhijit & Ramalingam, Siddharth & Stoddard, Brock V., 2015. "‘Doggedness’ or ‘disengagement’? An experiment on the effect of inequality in endowment on behaviour in team competitions," Journal of Economic Behavior & Organization, Elsevier, vol. 120(C), pages 80-93.
    12. Kräkel, Matthias & Nieken, Petra & Przemeck, Judith, 2014. "Risk taking and investing in electoral competition," European Journal of Political Economy, Elsevier, vol. 33(C), pages 98-120.
    13. Lacomba, Juan A. & Lagos, Francisco & Reuben, Ernesto & van Winden, Frans, 2017. "Decisiveness, peace, and inequality in games of conflict," Journal of Economic Psychology, Elsevier, pages 216-229.
    14. Paolo Crosetto & Antonio Filippin & Janna Heider, 2015. "A Study of Outcome Reporting Bias Using Gender Differences in Risk Attitudes," CESifo Economic Studies, CESifo, pages 239-262.
    15. Marco Sahm, 2017. "Risk Aversion and Prudence in Contests," CESifo Working Paper Series 6417, CESifo Group Munich.
    16. Lisa Anderson & Beth Freeborn, 2010. "Erratum to: Varying the intensity of competition in a multiple prize rent seeking experiment," Public Choice, Springer, vol. 143(1), pages 255-256, April.
    17. De Paola, Maria & Gioia, Francesca & Scoppa, Vincenzo, 2016. "The Adverse Consequences of Tournaments: Evidence from a Field Experiment," IZA Discussion Papers 9854, Institute for the Study of Labor (IZA).
    18. FALLUCCHI Francesco & RAMALINGAM Abhijit, 2017. "Inequality and Competitive Effort: The Roles of Asymmetric Resources, Opportunity and Outcomes," LISER Working Paper Series 2017-12, LISER.
    19. Richard Cornes & Roger Hartley, 2012. "Loss Aversion in Contests," The School of Economics Discussion Paper Series 1204, Economics, The University of Manchester.
    20. March, Christoph & Sahm, Marco, 2017. "Contests as selection mechanisms: The impact of risk aversion," BERG Working Paper Series 127, Bamberg University, Bamberg Economic Research Group.
    21. Sean P. Hargreaves Heap & Abhijit Ramalingam & Siddharth Ramalingam & Brock V. Stoddard, 2015. "‘Doggedness’ or ‘disengagement’? An experiment on the effect of inequality in endowment on behaviour in team competitions," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 13-08-R, School of Economics, University of East Anglia, Norwich, UK..
    22. Daniel Houser & Thomas Stratmann, 2012. "Gordon Tullock and experimental economics," Public Choice, Springer, vol. 152(1), pages 211-222, July.
    23. repec:eee:joepsy:v:63:y:2017:i:c:p:102-116 is not listed on IDEAS
    24. repec:elg:eechap:15325_10 is not listed on IDEAS
    25. Erik O. Kimbrough & Roman M. Sheremeta & Timothy Shields, 2011. "Resolving Conflicts by a Random Device," Working Papers 11-09, Chapman University, Economic Science Institute.

    More about this item

    Keywords

    rent seeking; experiment; rent dissipation; political competition;

    JEL classification:

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

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