Overbidding and overspreading in rent-seeking experiments: Cost structure and prize allocation rules

• 成果类型: Article
• 署名作者: Chowdhury, Subhasish M.; Sheremeta, Roman M.; Turocy, Theodore L.
• 署名单位: University of East Anglia; UK Research & Innovation (UKRI); Economic & Social Research Council (ESRC); University of East Anglia; University System of Ohio; Case Western Reserve University; Chapman University System; Chapman University; University of East Anglia; University of East Anglia
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2014.05.004
• 发表日期: 2014
• 页码: 224-238
• 关键词: Rent-seeking; Contest; contest design; experiments; quantal response; Overbidding

摘要

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. (C) 2014 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/).