Advertisement

Pushing the bad away: reverse Tullock contests

  • Bettina Rockenbach
  • Sebastian Schneiders
  • Marcin Waligora
Original Paper
  • 83 Downloads

Abstract

The literature on rent-seeking primarily focuses on contests for achieving gains, although contests for avoiding losses are also omnipresent. Examples for such ‘reverse’ contests are activities to prevent the close-down of a local school or the construction of a waste disposal close-by. While under standard preferences, investments in ‘reverse’ and ‘conventional’ contests should not be different, loss aversion predicts contests for avoiding losses to be fiercer than conventional ones. In our experimental data, the difference in investments between conventional and reverse Tullock contests is small and statistically insignificant. We discuss several explanations for this remarkable finding.

Keywords

Rent-seeking Contest Loss aversion Experiment 

JEL Classification

C72 C91 D72 

Notes

Acknowledgements

Financial support from the German Research Foundation (DFG) is gratefully acknowledged through FOR 1371. Sebastian Schneiders and Marcin Waligora thankfully acknowledge financial support by the Cologne Graduate School in Management, Economics and Social Sciences during their Ph.D. studies. We like to thank the editor and two anonymous referees for helpful suggestions and comments.

Supplementary material

40881_2018_52_MOESM1_ESM.docx (1 mb)
Supplementary material 1 (DOCX 1058 kb)

References

  1. Abbink, K., Brandts, J., Herrmann, B., & Orzen, H. (2010). Intergroup conflict and intra-group punishment in an experimental contest game. American Economic Review, 100(1), 420–447.CrossRefGoogle Scholar
  2. Ahn, T. K., Isaac, R. M., & Salmon, T. C. (2011). Rent seeking in groups. International Journal of Industrial Organization, 29(1), 116–125.CrossRefGoogle Scholar
  3. Amaldoss, W., & Rapoport, A. (2009). Excessive expenditures in two-stage contests: theory and experimental evidence. In I. N. Hangen & A. S. Nilsen (Eds.), Game Theory: Strategies, Equilibria and Theorems (pp. 241–266). NY: Nova Science Publishers.Google Scholar
  4. Andreoni, J. (1995). Warm-glow versus cold-prickle: The effects of positive and negative framing on cooperation in experiments. Quarterly Journal of Economics, CX.1, 1–21.CrossRefGoogle Scholar
  5. Baik, K. H., Chowdhury, S. M., & Ramalingam, A. (2015). Group size and matching protocol in contests. CBESS Discussion Paper, 13-11R, 1–30.Google Scholar
  6. Chowdhury, S. M., Jeon, J. Y., & Ramalingam, A. (2017). Property rights and loss aversion in contests. Economic Inquiry.  https://doi.org/10.1111/ecin.12505.Google Scholar
  7. Chowdhury, S., Sheremeta, R. M., & Turocy, T. L. (2014). Overbidding and overspreading in rent-seeking experiments: Cost structure and prize allocation rule. Games and Economic Behavior, 87, 224–238.CrossRefGoogle Scholar
  8. Congleton, R. D., Hillman, A. L., & Konrad, K. A. (2008). 40 years of Research on Rent Seeking (Vol. 1 and 2). Heidelberg: Springer.CrossRefGoogle Scholar
  9. Cornes, R., & Hartley, R. (2003). Loss aversion and the Tullock paradox. University of Nottingham Discussion Papers in Economics, 03(17), 1–25.Google Scholar
  10. Cornes, R., & Hartley, R. (2012). Loss aversion in contests. The University of Manchester Economics Discussion Paper Series, EDP-1204, 1–27.Google Scholar
  11. Dechenaux, E., Kovenock, D., & Sheremeta, R. M. (2015). A survey of experimental research on contests, all-pay auctions and tournaments. Experimental Economics, 18(4), 609–669.CrossRefGoogle Scholar
  12. Dutcher, E. G., Balafoutas, L., Lindner, F., Ryvkin, D., & Sutter, M. (2015). Strive to be first or avoid being last: An experiment on relative performance incentives. Games and Economic Behavior, 94, 39–56.CrossRefGoogle Scholar
  13. Fischbacher, U. (2007). z-Tree: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10(2), 171–178.CrossRefGoogle Scholar
  14. Goeree, J. K., Holt, C. H., & Palfrey, T. R. (2002). Quantal response equilibrium and overbidding in private-value auctions. Journal of Economic Theory, 104, 247–272.CrossRefGoogle Scholar
  15. Greiner, B. (2015). Subject pool recruitment procedures: Organizing experiments with ORSEE. Journal of the Economic Science Association, 1, 114–125.CrossRefGoogle Scholar
  16. Herrmann, B., & Orzen, H. (2008). The Appearance of homo rivalis: Social preferences and the nature of rent seeking. CeDEx Discussion Paper, No. 2008–10, 1–40.Google Scholar
  17. Hong, F., Hossain, T., & List, J. A. (2015). Framing manipulations in contests: A natural field experiment. Journal of Economic Behavior and Organization, 118, 372–382.CrossRefGoogle Scholar
  18. Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–291.CrossRefGoogle Scholar
  19. Kong, X. (2008). Loss aversion and rent-seeking: An experimental study. CeDEx Discussion Paper No., 2008–13, 1–32.Google Scholar
  20. Masiliunas, A., Mengel, F., Reiss, J. P. (2014). Behavioral variation in Tullock contests. Working paper.Google Scholar
  21. Palfrey, T. R., & Wang, S. W. (2009). On eliciting beliefs in strategic games. Journal of Economic Behavior and Organization, 71, 98–109.CrossRefGoogle Scholar
  22. Parco, J. E., Rapoport, A., & Amaldoss, W. (2005). Two-stage contests with budget constraints: An experimental study. Journal of Mathematical Psychology, 49, 320–338.CrossRefGoogle Scholar
  23. Rockenbach, B., Waligora, M. (2016a). On the reluctance to play best response in Tullock contests. Working Paper.Google Scholar
  24. Rockenbach, B., Waligora, M. (2016b). Beliefs and behavior in Tullock contests. Working Paper.Google Scholar
  25. Schlag, K. H., Tremewan, J., & van der Weele, J. J. (2015). A penny for your thoughts: a survey of methods for eliciting beliefs. Experimental Economics, 18(3), 457–490.CrossRefGoogle Scholar
  26. Schmitt, P., Shupp, R., Swope, K., & Cadigan, J. (2004). Multi-period rent-seeking contests with carryover: Theory and empirical evidence. Economic Governance, 5, 187–211.CrossRefGoogle Scholar
  27. Selten, R. (1998). Axiomatic foundation of the quadratic scoring rule. Experimental Economics, 62, 43–62.CrossRefGoogle Scholar
  28. Sheremeta, R. M. (2010). Experimental comparison of multi-stage and one-stage contests. Games and Economic Behavior, 68(2), 731–747.CrossRefGoogle Scholar
  29. Sheremeta, R. M. (2013). Overbidding and heterogeneous behavior in contest experiments. Journal of Economic Surveys, 27(3), 491–514.CrossRefGoogle Scholar
  30. Sonnemans, J., Schram, A., & Offerman, T. (1998). Public good provision and public bad prevention: The effect of framing. Journal of Economic Behavior and Organization, 34, 143–161.CrossRefGoogle Scholar
  31. Szidarovsky, F., & Okuguchi, K. (1997). On the existence and uniqueness of pure Nash equilibrium in rent-seeking games. Games and Economic Behavior, 18, 135–140.CrossRefGoogle Scholar
  32. Tullock, G. (1980). Efficient rent-seeking. In J. Buchanan, R. Tollison, & G. Tullock (Eds.), Toward a theory of the rent-seeking society (pp. 97–112). Austin: Texas University Press.Google Scholar
  33. Tversky, A., & Kahneman, D. (1992). Advances in prospect theory: Cumulative representation of uncertainty. Journal of Risk and Uncertainty, 5, 297–323.CrossRefGoogle Scholar

Copyright information

© Economic Science Association 2018

Authors and Affiliations

  1. 1.Chair in Behavioral EconomicsUniversity of CologneCologneGermany
  2. 2.Cologne Graduate School in Management, Economics and Social SciencesUniversity of CologneCologneGermany
  3. 3.Frontier Economics Ltd.CologneGermany

Personalised recommendations