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

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  • Stracke, Rudi
  • Höchtl, Tanja
  • Kerschbamer, Rudolf
  • Sunde, Uwe

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

  • Stracke, Rudi & Höchtl, Tanja & Kerschbamer, Rudolf & Sunde, Uwe, 2014. "Heterogeneity in Rent-Seeking Contests with Multiple Stages: Theory and Experimental Evidence," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100433, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc14:100433
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    Cited by:

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    2. Lackner, Mario & Stracke, Rudi & Sunde, Uwe & Winter-Ebmer, Rudolf, 2020. "Are competitors forward looking in strategic interactions? Field evidence from multistage tournaments," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 544-565.

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    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
    • C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other

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