Behavioral Dimensions of Contests

22 Pages Posted: 5 Aug 2014

Date Written: August 4, 2014

Abstract

The standard theoretical description of rent-seeking contests is that of rational individuals or groups engaging in socially inefficient behavior by exerting costly effort. Experimental studies find that the actual efforts of participants are significantly higher than predicted in the models based on rational behavior and that over-dissipation of rents (or overbidding or over-expenditure of resources) can occur. Although over-dissipation cannot be explained by the standard rational-behavior theory, it can be explained by incorporating behavioral dimensions into the standard model, such as (1) the utility of winning, (2) relative payoff maximization, (3) bounded rationality, and (4) judgmental biases. These explanations are not exhaustive but provide a coherent picture of important behavioral dimensions to be considered when studying rent-seeking behavior in theory and in practice.

Keywords: rent-seeking, contests, experiments, overbidding, over-dissipation

JEL Classification: C72, C91, C92, D72, D74

Suggested Citation

Sheremeta, Roman M., Behavioral Dimensions of Contests (August 4, 2014). Available at SSRN: https://ssrn.com/abstract=2476020 or http://dx.doi.org/10.2139/ssrn.2476020

Roman M. Sheremeta (Contact Author)

Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106
United States

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