Experimental Comparison of Multi-Stage and One-Stage Contests
33 Pages Posted: 9 Jul 2009
Date Written: May 5, 2009
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.
Keywords: rent-seeking, contest, contest design, experiments, risk aversion, over-dissipation
JEL Classification: C72, C91, D72
Suggested Citation: Suggested Citation