Level-K Models Rationalize Overspending in Contests

19 Pages Posted: 27 Nov 2016 Last revised: 4 Oct 2018

See all articles by Marco Serena

Marco Serena

Max Planck Institute for Tax Law and Public Finance

Malin Arve

Norwegian School of Economics (NHH)

Date Written: October 9, 2017

Abstract

The experimental evidence on contests often reports significant overspending of subjects as opposed to the Nash equilibrium. We complement the existing explanations by providing a theoretical rationale for overspending which is based on the level-k model.

Keywords: Contest, Level-k reasoning

JEL Classification: C72, D72

Suggested Citation

Serena, Marco and Arve, Malin, Level-K Models Rationalize Overspending in Contests (October 9, 2017). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2018-09. Available at SSRN: https://ssrn.com/abstract=2874894 or http://dx.doi.org/10.2139/ssrn.2874894

Marco Serena (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

Malin Arve

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

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