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

  • Tanja Hörtnagl

    ()

  • Rudolf Kerschbamer

    ()

  • Rudi Stracke

    ()

  • Uwe Sunde

    ()

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.

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File URL: https://eeecon.uibk.ac.at/wopec2/repec/inn/wpaper/2013-29.pdf
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Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2013-29.

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Length: 52 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:inn:wpaper:2013-29
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  1. J. Atsu Amegashie & C. Bram Cadsby & Yang Song, 2005. "Competitive Burnout: Theory and Experimental Evidence," Working Papers 0507, University of Guelph, Department of Economics and Finance.
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  8. Stracke, Rudi & Höchtl, Wolfgang & Kerschbamer, Rudolf & Sunde, Uwe, 2012. "Optimal Prizes in Dynamic Elimination Contests: An Experimental Analysis," Economics Working Paper Series 1208, University of St. Gallen, School of Economics and Political Science.
  9. Stracke, Rudi, 2013. "Contest design and heterogeneity," Munich Reprints in Economics 19571, University of Munich, Department of Economics.
  10. Andrew Schotter & Keith Weigelt, 1992. "Asymmetric Tournaments, Equal Opportunity Laws, and Affirmative Action: Some Experimental Results," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 511-539.
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  14. Höchtl, Wolfgang & Kerschbamer, Rudolf & Stracke, Rudi & Sunde, Uwe, 2011. "Incentives vs. Selection in Promotion Tournaments: Can a Designer Kill Two Birds with One Stone?," IZA Discussion Papers 5755, Institute for the Study of Labor (IZA).
  15. Nti, Kofi O, 1999. "Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, vol. 98(3-4), pages 415-30, March.
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