CONTEST DESIGN: AN EXPERIMENTAL INVESTIGATION

Authors

  • ROMAN M. SHEREMETA

    1. Sheremeta: Assistant Professor of Economics, Argyros School of Business and Economics, Chapman University, 1 University Drive, Orange, CA 92868, USA. Phone (714) 744-7604, Fax (714) 532-6081, E-mail: sheremet@chapman.edu
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    • I am particularly grateful to Tim Cason for excellent guidance and support. I thank Jason Abrevaya, Marco Casari, Subhasish Modak Chowdhury, Dan Kovenock, Jingjing Zhang, anonymous referees, and the associate editor of this journal for their constructive comments, as well as seminar participants at Purdue University for helpful suggestions. This research has been supported by National Science Foundation Grant (SES-0751081). Any remaining errors are mine.


Abstract

This paper experimentally compares the performance of four simultaneous lottery contests: a grand contest, two multiple prize settings (equal and unequal prizes), and a contest which consists of two subcontests. Consistent with the theory, the grand contest generates the highest effort levels among all simultaneous contests. In multi-prize settings, equal prizes produce lower efforts than unequal prizes. The results also support the argument that joint contests generate higher efforts than an equivalent number of subcontests. Contrary to the theory, there is significant over-dissipation. This over-dissipation can be partially explained by strong endowment size effects. Subjects who receive higher endowments tend to over-dissipate, whereas such over-dissipation disappears when the endowments are lower. This behavior is consistent with the predictions of a quantal response equilibrium. We also find that less risk-averse subjects over-dissipate more. (JEL C72, C91, D72)

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