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Heterogeneity in Rent-Seeking Contests with Multiple Stages: Theory and Experimental Evidence

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  • Tanja Hörtnagl
  • Rudolf Kerschbamer
  • Rudi Stracke
  • Uwe Sunde

Abstract

This paper investigates how heterogeneity in contestants' investment costs affects the competition intensity in a dynamic elimination contest. Theory predicts that the absolute level of investment costs has no effect on the competition intensity in homogeneous interactions. Relative cost differences in heterogeneous interactions, however, reduce equilibrium expenditures. Evidence from lab experiments for treatments with homogeneous participants is qualitatively in line with the theoretical prediction. The effect of cost differences on expenditures is positive rather than negative, however, in all heterogeneous treatments.

Suggested Citation

  • Tanja Hörtnagl & Rudolf Kerschbamer & Rudi Stracke & Uwe Sunde, 2013. "Heterogeneity in Rent-Seeking Contests with Multiple Stages: Theory and Experimental Evidence," Working Papers 2013-29, Faculty of Economics and Statistics, Universität Innsbruck.
    • Handle: RePEc:inn:wpaper:2013-29
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    More about this item

    Keywords

    Multi-Stage Contest; Heterogeneity; Experiment; Joy of Winning;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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