Contest Design: An Experimental Investigation

32 Pages Posted: 9 Jul 2009

Multiple version iconThere are 2 versions of this paper

Date Written: March 25, 2009

Abstract

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, while 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.

Keywords: rent-seeking, contest, contest design, experiments, risk aversion, over-dissipation

JEL Classification: C72, C91, D72

Suggested Citation

Sheremeta, Roman M., Contest Design: An Experimental Investigation (March 25, 2009). Available at SSRN: https://ssrn.com/abstract=1430944 or http://dx.doi.org/10.2139/ssrn.1430944

Roman M. Sheremeta (Contact Author)

Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106
United States

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