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

  • Lisa R. Anderson

    ()

    (Department of Economics, College of William and Mary)

  • Beth A. Freeborn

    ()

    (Department of Economics, College of William and Mary)

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

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Paper provided by Department of Economics, College of William and Mary in its series Working Papers with number 75.

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Length: 25 pages
Date of creation: 15 Aug 2008
Date of revision:
Handle: RePEc:cwm:wpaper:75
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  1. Berry, S Keith, 1993. " Rent-Seeking with Multiple Winners," Public Choice, Springer, vol. 77(2), pages 437-43, October.
  2. Anderson, Lisa R. & Mellor, Jennifer M., 2008. "Predicting health behaviors with an experimental measure of risk preference," Journal of Health Economics, Elsevier, vol. 27(5), pages 1260-1274, September.
  3. Eckel, Catherine C. & Grossman, Philip J., 2008. "Men, Women and Risk Aversion: Experimental Evidence," Handbook of Experimental Economics Results, Elsevier.
  4. Anderson, Lisa R & Stafford, Sarah L, 2003. " An Experimental Analysis of Rent Seeking under Varying Competitive Conditions," Public Choice, Springer, vol. 115(1-2), pages 199-216, April.
  5. Millner, Edward L & Pratt, Michael D, 1991. " Risk Aversion and Rent-Seeking: An Extension and Some Experimental Evidence," Public Choice, Springer, vol. 69(1), pages 81-92, February.
  6. Amegashie, J Atsu, 1999. " The Number of Rent-Seekers and Aggregate Rent-Seeking Expenditures: An Unpleasant Result," Public Choice, Springer, vol. 99(1-2), pages 57-62, April.
  7. Nitzan, Shmuel, 1991. "Collective Rent Dissipation," Economic Journal, Royal Economic Society, vol. 101(409), pages 1522-34, November.
  8. Konrad, Kai A & Schlesinger, Harris, 1997. "Risk Aversion in Rent-Seeking and Rent-Augmenting Games," Economic Journal, Royal Economic Society, vol. 107(445), pages 1671-83, November.
  9. Clark, Derek J & Riis, Christian, 1996. " A Multi-winner Nested Rent-Seeking Contest," Public Choice, Springer, vol. 87(1-2), pages 177-84, April.
  10. Clark, Derek J. & Riis, Christian, 1998. "Influence and the discretionary allocation of several prizes," European Journal of Political Economy, Elsevier, vol. 14(4), pages 605-625, November.
  11. R. Kenneth Godwin & Edward J. López & Barry J. Seldon, 2006. "Incorporating Policymaker Costs and Political Competition into Rent-Seeking Games," Southern Economic Journal, Southern Economic Association, vol. 73(1), pages 37–54, July.
  12. Edward Millner & Michael Pratt, 1989. "An experimental investigation of efficient rent-seeking," Public Choice, Springer, vol. 62(2), pages 139-151, August.
  13. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  14. Yates, Andrew J. & Heckelman, Jac C., 2001. "Rent-setting in multiple winner rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 17(4), pages 835-852, November.
  15. John Cadigan, 2007. "Two-State Team Rent-Seeking: Experimental Analysis," Southern Economic Journal, Southern Economic Association, vol. 74(1), pages 85-103, July.
  16. Hillman, Arye L & Katz, Eliakim, 1984. "Risk-Averse Rent Seekers and the Social Cost of Monopoly Power," Economic Journal, Royal Economic Society, vol. 94(373), pages 104-10, March.
  17. David Bullock & E. Rutström, 2007. "Policy making and rent-dissipation: An experimental test," Experimental Economics, Springer, vol. 10(1), pages 21-36, March.
  18. Sun, Guang-Zhen & Ng, Yew-Kwang, 1999. " The Effect of Number and Size of Interest Groups on Social Rent Dissipation," Public Choice, Springer, vol. 101(3-4), pages 251-65, December.
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