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

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.

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