Many economic, political and social environments can be described as contests in which agents exert costly effort while competing over the distribution of a scarce resource. These environments have ...been studied using Tullock contests, all-pay auctions and rank-order tournaments. This survey provides a comprehensive review of experimental research on these three canonical contests. First, we review studies investigating the basic structure of contests, including the number of players and prizes, spillovers and externalities, heterogeneity, risk and incomplete information. Second, we discuss dynamic contests and multi-battle contests. Then we review studies examining sabotage, feedback, bias, collusion, alliances, group contests and gender, as well as field experiments. Finally, we discuss applications of contests and suggest directions for future research.
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CEKLJ, EMUNI, FIS, FZAB, GEOZS, GIS, IJS, IMTLJ, KILJ, KISLJ, MFDPS, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, SBMB, SBNM, UKNU, UL, UM, UPUK, VKSCE, ZAGLJ
Group contests are ubiquitous. Some examples include warfare between countries, competition between political parties, team‐incentives within firms, and rent‐seeking. In order to succeed, members of ...the same group have incentives to cooperate with each other by expending effort. However, since effort is costly, each member also has an incentive to abstain from expending any effort and instead free ride on the efforts of other members. Contest theory predicts that the intensity of competition between groups and the amount of free riding within groups depend on the group size, sharing rule, group impact function, contest success function, and heterogeneity of players. We review experimental studies testing these theoretical predictions. Most studies find significant over‐expenditure of effort relative to the theory and significant heterogeneity of behavior within and between groups. Also, most studies find support for the comparative statics predictions of the theory (with the exception of the “group size paradox”). Finally, studies show that there are effective mechanisms that can promote within‐group cooperation and conflict resolution mechanisms that can de‐escalate and potentially eliminate between‐group conflict.
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BFBNIB, FZAB, GIS, IJS, IZUM, KILJ, NLZOH, NUK, OILJ, PILJ, SAZU, SBCE, SBMB, UL, UM, UPUK
We provide an overview of experimental literature on contests and point out the two main phenomena observed in most contest experiments: (i) overbidding relative to the standard Nash equilibrium ...prediction and (ii) heterogeneous behavior of ex ante symmetric contestants. Based on the sample of contest experiments that we review, the median overbidding rate is 72%. We provide different explanations for the overbidding phenomenon, including bounded rationality, utility of winning, other‐regarding preferences, probability distortion, and the shape of the payoff function. We also provide explanations for heterogeneous behavior of contestants based on differences in preferences toward winning, inequality, risk and losses, and demographic differences. Furthermore, we suggest mechanisms that can reduce overbidding and induce more homogeneous behavior. Finally, we discuss directions for future research.
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BFBNIB, FZAB, GIS, IJS, IZUM, KILJ, NLZOH, NUK, OILJ, PILJ, SAZU, SBCE, SBMB, UL, UM, UPUK
This article experimentally studies a two-stage elimination contest and compares its performance with a one-stage contest. Contrary to the theory, the two-stage contest generates higher revenue than ...the equivalent one-stage contest. There is significant over-dissipation in both stages of the two-stage contest and experience diminishes over-dissipation in the first stage but not in the second stage. Our experiment provides evidence that winning is a component in a subject's utility. A simple behavioral model that accounts for a non-monetary utility of winning can explain significant over-dissipation in both contests. It can also explain why the two-stage contest generates higher revenue than the equivalent one-stage contest.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
This paper experimentally compares the performance of four simultaneous lottery contests: a grand contest, two multiple prize settings (equal and unequal prizes), and a contest which consists of two ...subcontests. Consistent with the theory, the grand contest generates the highest effort levels among all simultaneous contests. In multi‐prize settings, equal prizes produce lower efforts than unequal prizes. The results also support the argument that joint contests generate higher efforts than an equivalent number of subcontests. Contrary to the theory, there is significant over‐dissipation. This over‐dissipation can be partially explained by strong endowment size effects. Subjects who receive higher endowments tend to over‐dissipate, whereas such over‐dissipation disappears when the endowments are lower. This behavior is consistent with the predictions of a quantal response equilibrium. We also find that less risk‐averse subjects over‐dissipate more. (JEL C72, C91, D72)
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BFBNIB, DOBA, FZAB, GIS, IJS, IZUM, KILJ, NLZOH, NUK, OILJ, PILJ, PNG, SAZU, SBCE, SBMB, SIK, UILJ, UKNU, UL, UM, UPUK
This study provides a unified framework to compare three canonical types of contests: winner-take-all contests won by the best performer, winner-take-all lotteries where probability of success is ...proportional to performance, and proportional-prize contests in which rewards are shared in proportion to performance. We derive equilibria and observe outcomes from each contest in a laboratory experiment. Equilibrium and observed efforts are highest in winner-take-all contests. Lotteries and proportional-prize contests have the same Nash equilibrium, but empirically, lotteries induce higher efforts and lower, more unequal payoffs. Behavioral deviations from theoretical benchmarks in different contests are caused by the same underlying attributes, such as risk-aversion and the utility of winning. Finally, we find that subjects exhibit consistent behavior across different types of contests, with subjects exerting higher effort in one contest also exerting higher effort in another contest.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
Some economists argue that consumption of publicly visible goods is driven by social status. Making a causal inference about this claim is difficult with observational data. We conduct an experiment ...in which we vary both whether a purchase of a physical product is publicly visible or kept private and whether the income used for purchase is linked to social status or randomly assigned. Making consumption choices visible leads to a large increase in demand when income is linked to status, but not otherwise. We investigate the characteristics that mediate this effect and estimate its impact on welfare.
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CEKLJ, EMUNI, FIS, FZAB, GEOZS, GIS, IJS, IMTLJ, KILJ, KISLJ, MFDPS, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, SBMB, SBNM, UKNU, UL, UM, UPUK, VKSCE, ZAGLJ
A well-known theoretical result in the contest literature is that greater heterogeneity decreases investments of contestants because of the “discouragement effect.” Levelling the playing field by ...favouring weaker contestants through strict bid-caps and favourable tie-breaking rules can reduce discouragement and increase the designer's revenue. We test these predictions in a laboratory experiment. Our data confirm that placing bid-caps and using favourable tie-breaking rules significantly diminishes discouragement of weaker contestants. However, its impact on revenues is muted by the fact that the encouragement of weaker contestants is offset by stronger contestants competing less aggressively, even when not predicted by theory. We discuss deviations from the Nash predictions in light of different behavioural approaches.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
Costless pre-play communication has been found to effectively facilitate coordination and enhance efficiency in games with Pareto-ranked equilibria. We report an experiment in which two groups ...compete in a weakest-link contest by expending costly efforts. Allowing intra-group communication leads to more aggressive competition and greater coordination than control treatments without any communication. On the other hand, allowing inter-group communication leads to less destructive competition. As a result, intra-group communication decreases while inter-group communication increases payoffs. Our experiment thus provides an example of an environment where communication can either enhance or damage efficiency. This contrasts sharply with experimental findings from public goods and other coordination games, where communication always enhances efficiency and often leads to socially optimal outcomes.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
Conflict in the pool: A field experiment Balafoutas, Loukas; Faravelli, Marco; Fornwagner, Helena ...
Journal of economic behavior & organization,
11/2023, Volume:
215
Journal Article
Peer reviewed
Open access
We conduct a field experiment on conflict in swimming pools. When all lanes are occupied, an actor joins the least crowded lane and asks one of the swimmers to move to another lane. The lane ...represents a contested scarce resource. We vary the actor's valuation (high and low) for the good through the message they deliver. Also, we take advantage of the natural variation in the number of swimmers to proxy for their valuation. Consistent with theoretical predictions, a swimmer's propensity to engage in conflict increases in scarcity and decreases in the actor's valuation. We complement the results with survey evidence.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
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