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Inequality and Competitive Effort: The Roles of Asymmetric Resources, Opportunity and Outcomes

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  • FALLUCCHI Francesco
  • RAMALINGAM Abhijit

Abstract

We study the effects of different sources of inequality in a commonplace economic interaction: competition. We investigate how individuals react to different types of inequality in experimental two-player Tullock contests where contestants expend resources to win a prize. We study three different sources of inequality: resources, abilities and possible outcomes. We find that overall competitive effort is greater in the presence of inequality in abilities than other inequalities. Unlike other forms, inequality in abilities elicits a very aggressive reaction from disadvantaged players relative to their advantaged opponents. The Quantal Response Equilibrium (QRE) suggests that financial incentives are less salient in the presence of a biased contest procedure.

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  • FALLUCCHI Francesco & RAMALINGAM Abhijit, 2017. "Inequality and Competitive Effort: The Roles of Asymmetric Resources, Opportunity and Outcomes," LISER Working Paper Series 2017-12, Luxembourg Institute of Socio-Economic Research (LISER).
    • Handle: RePEc:irs:cepswp:2017-12
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    More about this item

    Keywords

    rent seeking; contest; experiment; inequality; inequity; Quantal Response Equilibrium;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)

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