Information Disclosure in Contests With Endogenous Entry: An Experiment

46 Pages Posted: 26 Jul 2018 Last revised: 14 May 2019

See all articles by Luke Boosey

Luke Boosey

Florida State University - Department of Economics

Philip Brookins

University of South Carolina

Dmitry Ryvkin

Florida State University

Date Written: May 19, 2019

Abstract

We use a laboratory experiment to study the effects of disclosing the number of active participants in contests with endogenous entry. At the first stage potential participants decide whether to enter competition, and at the second stage entrants choose their investments. In a 2×2 design, we manipulate the size of the outside option, ω, and whether or not the number of entrants is disclosed between the stages. Theory predicts more entry for lower ω, and the levels of entry and aggregate investment to be independent of disclosure in all cases. We find empirical entry frequencies decreasing with ω. For aggregate investment, we find no effect of disclosure when ω is low, but a strong positive effect of disclosure when ω is high. The difference is driven by substantial overbidding in contests with a small, publicly known number of players, contrasted by more restrained bidding in contests where the number of players is uncertain and may be small. The behavior under disclosure is explained by a combination of joy of winning and entry regret.

Keywords: contest, endogenous entry, information disclosure, experiment

JEL Classification: C72, C92, D82

Suggested Citation

Boosey, Luke and Brookins, Philip and Ryvkin, Dmitry, Information Disclosure in Contests With Endogenous Entry: An Experiment (May 19, 2019). Available at SSRN: https://ssrn.com/abstract=3208644 or http://dx.doi.org/10.2139/ssrn.3208644

Luke Boosey

Florida State University - Department of Economics ( email )

288 Bellamy Building
Tallahassee, FL 32306-2180
United States
850-644-7208 (Phone)

Philip Brookins (Contact Author)

University of South Carolina ( email )

Department of Economics
1014 Greene St
Columbia, SC 29208
United States
8037773603 (Phone)

HOME PAGE: http://philipbrookins.com

Dmitry Ryvkin

Florida State University ( email )

Tallahassee, FL 30306-2180
United States

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