When less is more: Rationing and rent dissipation in stochastic contests

• 成果类型: Article
• 署名作者: Faravelli, Marco; Stanca, Luca
• 署名单位: University of Queensland; University of Milano-Bicocca
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2011.05.008
• 发表日期: 2012
• 页码: 170-183
• 关键词: Stochastic contests; rent seeking; laboratory experiments

摘要

This paper shows how to maximize revenue when a contest is noisy. We consider a case where two or more contestants bid for a prize in a stochastic contest where all bidders value the prize equally. We show that, whenever a Tullock contest yields under-dissipation, the auctioneer's revenue can be increased by optimally fixing the number of tickets. In particular, in a stochastic contest with proportional probabilities, it is possible to obtain (almost) full rent dissipation. We test this hypothesis with a laboratory experiment. The results indicate that, as predicted, revenue is significantly higher in a lottery with rationing than in a standard lottery. On the other hand, an alternative rationing mechanism that does not limit total expenditures fails to increase revenue relative to a standard lottery. (C) 2011 Elsevier Inc. All rights reserved.