Abstract
We report the results of laboratory experiments on rent-seeking contests with endogenous participation. Theory predicts that (a) contest entry and rent-seeking expenditures increase with the size of the prize and (b) earnings are equalized between the contest and the outside option. While the directional predictions offered in (a) are supported in the data, the level predictions are not. Prediction (b) is not supported in the data: when the prize is large, contest participants earn more than the outside option. When the prize is small, contest participants earn less. Previous studies of gender and contest competition suggest that females should (a) not perform as well in the contest; and (b) enter at a lower rate. We find some support for (a) but not for (b). Women participate in the contest at the same rate as men.
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We thank Tim Cason, Roman Sheremeta, Dan Kovenock, two anonymous referees and participants at the Centre for Economic Studies/Information und Forschung (CESifo) Venice Summer Institute for very useful comments. Morgan gratefully acknowledges the financial support of the National Science Foundation.
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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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Morgan, J., Orzen, H. & Sefton, M. Endogenous entry in contests. Econ Theory 51, 435–463 (2012). https://doi.org/10.1007/s00199-010-0544-z
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DOI: https://doi.org/10.1007/s00199-010-0544-z
Keywords
- Contests
- Competition
- Entry
- Experiments
JEL Classification
- C9
- D4
- D72