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Information Feedback and Contest Structure in Rent-Seeking Games

  • Francesco Fallucchi

    ()

    (School of Economics, University of Nottingham)

  • Elke Renner

    ()

    (School of Economics, University of Nottingham)

  • Martin Sefton

    ()

    (School of Economics, University of Nottingham)

We investigate the role of information feedback in rent-seeking games with two different contest structures. In the stochastic contest a contestant wins the entire rent with probability equal to her share of rent-seeking expenditures; in the deterministic contest she receives a share of the rent equal to her share of rent-seeking expenditures. Information feedback has very different effects depending on the contest structure. We observe the highest rent dissipation in stochastic contests when players only get feedback on own choices and earnings. In these contests aggregate expenditures usually exceed the value of the rent. We find that giving additional feedback about rival's choices and earnings moderates average expenditures. In contrast, in deterministic contests average expenditures converge to equilibrium levels when subjects only get feedback about own choices and earnings. In these contests additional feedback about rival's choices and earnings has the opposite effect of raising average expenditures.

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Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2012-12.

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Date of creation: Dec 2012
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Handle: RePEc:not:notcdx:2012-12
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