Abstract

http://ssrn.com/abstract=2014994
 
 

References (51)



 
 

Citations (3)



 


 



Winner-Take-All and Proportional-Prize Contests: Theory and Experimental Results


Roman M. Sheremeta


Case Western Reserve University; Case Western Reserve University

William A. Masters


Tufts University - Friedman School of Nutrition - Department of Food and Nutrition Policy

Timothy N. Cason


Purdue University - Krannert School of Management

October 25, 2013


Abstract:     
This study provides a unified framework to compare three canonical forms of competition: 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. Performance is affected by random noise, reflecting imperfect information. 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 contestants to choose higher efforts and receive lower, more unequal payoffs. This result may explain why contest designers who seek only to elicit effort offer lump-sum prizes, even though contestants would be better off with proportional rewards. Finally, we collect measures of contestants’ risk aversion, other-regarding preferences, and utility of winning a contest, and use them to partially explain deviations from standard and homogeneous equilibrium models of effort choice in the three contests.

Number of Pages in PDF File: 41

Keywords: contests, rent-seeking, lotteries, incentives in experiments, risk aversion

JEL Classification: C72, D72, D74, J33

working papers series


Download This Paper

Date posted: March 4, 2012 ; Last revised: October 26, 2013

Suggested Citation

Sheremeta, Roman M. and Masters, William A. and Cason, Timothy N., Winner-Take-All and Proportional-Prize Contests: Theory and Experimental Results (October 25, 2013). Available at SSRN: http://ssrn.com/abstract=2014994 or http://dx.doi.org/10.2139/ssrn.2014994

Contact Information

Roman M. Sheremeta (Contact Author)
Case Western Reserve University ( email )
10900 Euclid Ave.
Cleveland, OH 44106
United States
Case Western Reserve University ( email )
Cleveland, CA 44106
United States
(216) 368-4271 (Phone)
HOME PAGE: http://sites.google.com/site/romansheremeta/
William A. Masters
Tufts University - Friedman School of Nutrition - Department of Food and Nutrition Policy ( email )
150 Harrison Avenue
Boston, MA 02111
United States
HOME PAGE: http://sites.tufts.edu/willmasters
Timothy N. Cason
Purdue University - Krannert School of Management ( email )
1310 Krannert Building
West Lafayette, IN 47907-1310
United States
765-494-1737 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 999
Downloads: 336
Download Rank: 49,519
References:  51
Citations:  3

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.313 seconds