Pushing the bad away: reverse Tullock contests
- 83 Downloads
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.
KeywordsRent-seeking Contest Loss aversion Experiment
JEL ClassificationC72 C91 D72
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.
- 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
- 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
- Cornes, R., & Hartley, R. (2003). Loss aversion and the Tullock paradox. University of Nottingham Discussion Papers in Economics, 03(17), 1–25.Google Scholar
- Cornes, R., & Hartley, R. (2012). Loss aversion in contests. The University of Manchester Economics Discussion Paper Series, EDP-1204, 1–27.Google Scholar
- 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
- Kong, X. (2008). Loss aversion and rent-seeking: An experimental study. CeDEx Discussion Paper No., 2008–13, 1–32.Google Scholar
- Masiliunas, A., Mengel, F., Reiss, J. P. (2014). Behavioral variation in Tullock contests. Working paper.Google Scholar
- Rockenbach, B., Waligora, M. (2016a). On the reluctance to play best response in Tullock contests. Working Paper.Google Scholar
- Rockenbach, B., Waligora, M. (2016b). Beliefs and behavior in Tullock contests. Working Paper.Google Scholar
- 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