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The Grant Proposal Game

Author

Listed:
  • Yevgeny Mugerman
  • Eyal Winter
  • Tomer Yafeh

Abstract

We explore strategic betting in competitive environments with multiple participants and potential winners. We examine two scenarios: an “inclusive†low-competition scenario with many winners and an “exclusive†high-competition scenario with few winners. Using a simple model, we illustrate the strategic insights in these scenarios and present experimental results that align with our predictions. In the experiment, participants made repeated bets with feedback on past results and their payoffs. In the inclusive scenario, all but the worst guessers were rewarded, while in the exclusive scenario, only the top guessers received rewards. Our findings show that in the inclusive scenario, participants exhibit herding behavior by coordinating their bets, while in the exclusive scenario, they diversify their bets across multiple options. The main general insight of our findings is that in moderate competitions, one tends to join the majority to avoid standing out in case of failure, whereas in intense competitions, one tends to differentiate oneself from one’s peers to ensure that success stands out. This insight is relevant for a broad domain of strategic interactions.

Suggested Citation

  • Yevgeny Mugerman & Eyal Winter & Tomer Yafeh, 2025. "The Grant Proposal Game," Working Papers 423283787, Lancaster University Management School, Economics Department.
    • Handle: RePEc:lan:wpaper:423283787
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    File URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/LancasterWP2025_004.pdf
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    References listed on IDEAS

    as
    1. Yevgeny Mugerman & Eyal Winter & Tomer Yafeh, 2024. "Performance Monitoring and the Incentives for Exertion of Effort," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 14(02), pages 1-19, June.
    2. Charness, Gary & Gneezy, Uri & Halladay, Brianna, 2016. "Experimental methods: Pay one or pay all," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 141-150.
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    4. Medrano, Luis Angel & Vives, Xavier, 2001. "Strategic Behavior and Price Discovery," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 221-248, Summer.
    5. Marco Cipriani & Antonio Guarino, 2009. "Herd Behavior in Financial Markets: An Experiment with Financial Market Professionals," Journal of the European Economic Association, MIT Press, vol. 7(1), pages 206-233, March.
    6. Mugerman, Yevgeny & Steinberg, Nadav & Wiener, Zvi, 2022. "The exclamation mark of Cain: Risk salience and mutual fund flows," Journal of Banking & Finance, Elsevier, vol. 134(C).
    7. Hao Jiang & Michela Verardo, 2018. "Does Herding Behavior Reveal Skill? An Analysis of Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 73(5), pages 2229-2269, October.
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    Keywords

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    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • G1 - Financial Economics - - General Financial Markets

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