Experimental Comparison of Multi-Stage and One-Stage Contests

33 Pages Posted: 9 Jul 2009

Date Written: May 5, 2009

Abstract

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

Sheremeta, Roman M., Experimental Comparison of Multi-Stage and One-Stage Contests (May 5, 2009). Available at SSRN: https://ssrn.com/abstract=1430947 or http://dx.doi.org/10.2139/ssrn.1430947

Roman M. Sheremeta (Contact Author)

Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106
United States

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