Article

# Experimental comparison of multi-stage and one-stage contests

The George L. Argyros School of Business and Economics, Chapman University, 1 University Drive, Orange, CA 92866, USA; Received 12 December 2008. Available online 11 August 2009.

Games and Economic Behavior (Impact Factor: 0.83). 01/2010; 68(2):731-747. DOI: 10.1016/j.geb.2009.08.001 Source: RePEc

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**ABSTRACT:**We explore how models of boundedly-rational decision-making in games can explain the overdissipation of rents in laboratory Tullock contest games. Using a new series of experiments in which group size is varied across sessions, we find that models based on logit choice organize the data well. In this setting, logit quantal response equilibrium (QRE) is a limit of a cognitive hierarchy (CH) model with logit best responses for appropriate parameters. While QRE captures the data well, the CH fits provide support for relaxing the equilibrium assumption. Both the QRE and CH models have parameters which capture boundedness of rationality. The maximum likelihood fits of both models yield parameters indicating rationality is more restricted as group size grows. Period-by-period adjustments of expenditures are more likely to be in the earnings-improving direction in smaller groups.Journal of Economic Behavior & Organization 03/2014; · 1.01 Impact Factor -
##### Article: Contests with Ambiguity

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**ABSTRACT:**The paper examines the effect of ambiguity on contests where multiple parties expend resources to win a prize. We develop a model where contenders perceive ambiguity about their opponents' strategies and determine how perceptions of ambiguity and attitudes to ambiguity affect equilibrium choice. The paper also investigates how equilibrium under ambiguity is related to behavior where contenders have expected utility preferences. Our model can explain experimental results such as overbidding and overspreading relative to Nash predictions.SSRN Electronic Journal 06/2014; -
##### Article: Overbidding and overspreading in rent-seeking experiments: Cost structure and prize allocation rules

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**ABSTRACT:**We study experimentally the effects of cost structure and prize allocation rules on the performance of rent-seeking contests. Most previous studies use a lottery prize rule and linear cost, and find both overbidding relative to the Nash equilibrium prediction and significant variation of efforts, which we term ‘overspreading.’ We investigate the effects of allocating the prize by a lottery versus sharing it proportionally, and of convex versus linear costs of effort, while holding fixed the Nash equilibrium prediction for effort. We find the share rule results in average effort closer to the Nash prediction, and lower variation of effort. Combining the share rule with a convex cost function further enhances these results. We can explain a significant amount of non-equilibrium behavior by features of the experimental design. These results contribute towards design guidelines for contests based on behavioral principles that take into account implementation features of a contest.Games and Economic Behavior 09/2014; · 0.83 Impact Factor

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