Skip to main content
SpringerLink
Log in
Menu
Find a journal Publish with us
Search
Cart
  1. Home
  2. Economic Theory
  3. Article

Endogenous entry in contests

  • Symposium
  • Open Access
  • Published: 10 June 2010
  • volume 51, pages 435–463 (2012)
Download PDF

You have full access to this open access article

Economic Theory Aims and scope Submit manuscript
Endogenous entry in contests
Download PDF
  • John Morgan1,
  • Henrik Orzen2 &
  • Martin Sefton3 
  • 1599 Accesses

  • 78 Citations

  • 3 Altmetric

  • Explore all metrics

  • Cite this article

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.

Download to read the full article text

Working on a manuscript?

Avoid the common mistakes

References

  • Abbink K., Brandts J., Herrmann B., Orzen H.: Inter-group conflict and intra-group punishment in an experimental contest game. Am Econ Rev 100, 420–447 (2010)

    Article  Google Scholar 

  • Anderson L.R., Stafford S.L.: An experimental analysis of rent-seeking under varying competitive conditions. Public Choice 115, 199–216 (2003)

    Article  Google Scholar 

  • Braga J., Humphrey S., Starmer C.: Market experience eliminates some anomalies—and creates new ones. Eur Econ Rev 53, 401–416 (2009)

    Article  Google Scholar 

  • Camerer C.: Behavioral game theory: experiments in strategic interaction. Princeton University Press, Princeton (2003)

    Google Scholar 

  • Casari M., Ham J.C., Kagel J.H.: Selection bias, demographic effects, and ability effects in common value auction experiments. Am Econ Rev 97, 1278–1304 (2007)

    Article  Google Scholar 

  • Cason, T.N., Masters, W.A., Sheremeta, R.M.: Entry into winner-take-all and proportional-prize contests: an experimental study. J Public Econ (2010, forthcoming)

  • Charness G., Levin D.: The origin of the winner’s curse: a laboratory study. Am Econ J Microecon 1, 207–236 (2009)

    Article  Google Scholar 

  • Chen, Y., Katuscak, P., Ozdenoren, E.: Why can’t a woman bid more like a man? University of Michigan Working Paper (2005)

  • Corcoran W.: Long-run equilibrium and total expenditures on rent-seeking. Public Choice 43, 89–94 (1984)

    Article  Google Scholar 

  • Corcoran W., Karels G.: Rent-seeking behavior in the long-run. Public Choice 46, 227–246 (1985)

    Article  Google Scholar 

  • Cornes, R., Hartley, R.: Risk aversion in symmetric and asymmetric contests. Econ Theory (2010). doi:10.1007/s00199-009-0490-9

  • Cox J., Grether D.: The preference reversal phenomenon: response mode, markets and incentives. Econ Theory 7, 381–405 (1996)

    Google Scholar 

  • Davis D.D., Reilly R.J.: Do too many cooks always spoil the stew? An experimental analysis of rent-seeking and the role of a strategic buyer. Public Choice 95, 89–115 (1998)

    Article  Google Scholar 

  • Dohmen, T., Falk, A., Huffman, D., Sunde, U., Schupp, J., Wagner, G.: Individual risk attitudes: new evidence from a large, representative, experimentally-validated survey. IZA Discussion Paper 1730 (2005)

  • Fonseca M.A.: An experimental investigation of asymmetric contests. Int J Ind Organ 27, 582–591 (2009)

    Article  Google Scholar 

  • Fullerton R.L., McAfee R.P.: Auctioning entry into tournaments. J Polit Econ 107, 573–605 (1999)

    Article  Google Scholar 

  • Gneezy U., Niederle M., Rustichini A.: Performance in competitive environments: gender differences. Q J Econ 118, 1049–1074 (2003)

    Article  Google Scholar 

  • Ham J., Kagel J.: Gender effects in private value auctions. Econ Lett 92, 375–382 (2006)

    Article  Google Scholar 

  • Hehenkamp B., Leininger W., Possajennikov A.: Evolutionary equilibrium in tullock contests: spite and overdissipation. Eur J Polit Econ 20, 1045–1057 (2004)

    Article  Google Scholar 

  • Herrmann, B., Orzen, H.: The appearance of homo rivalis: social preferences and the nature of rent-seeking. CeDEx Discussion Paper 2008-10, University of Nottingham (2008)

  • Kahneman D.: Experimental economics: a psychological perspective. In: Tietz, R., Albers, W., Selten, R. (eds) Bounded Rational Behavior in Experimental Games and Markets, Springer, Berlin (1988)

    Google Scholar 

  • Kong, X.: Loss aversion and rent-seeking: an experimental study. CeDEx Discussion Paper 2008-13, University of Nottingham (2008)

  • Konrad, K.A.: Strategy in contests: an introduction. WZB-Markets and Politics Working Paper No. SP II 2007-01 (2007)

  • Konrad K.A., Schlesinger H.: Risk aversion in rent-seeking and rent augmenting games. Econ J 107, 1671–1683 (1997)

    Article  Google Scholar 

  • Mathews T., Namoro S.: Participation incentives in rank-order tournaments with endogenous entry. J Econ 95, 1–23 (2008)

    Article  Google Scholar 

  • Millner E.L., Pratt M.D.: An experimental investigation of efficient rent-seeking. Public Choice 62, 139–151 (1989)

    Article  Google Scholar 

  • Millner E.L., Pratt M.D.: Risk aversion and rent-seeking: an extension and some experimental evidence. Public Choice 69, 81–92 (1991)

    Article  Google Scholar 

  • Morgan, J., Steiglitz, K., Reis, G.: The spite motive and equilibrium behavior in auctions. Contributions to Economic Analysis and Policy 2:1, Article 5 (2003)

    Google Scholar 

  • Morgan J., Orzen H., Sefton M.: Network architecture and traffic flows. Games Econ Behav 66, 348–372 (2009)

    Article  Google Scholar 

  • Morgan, J., Orzen, H., Sefton, M.: Does entry eliminate economic profit? An experimental study. University of California, Berkeley Working Paper (2010)

  • Niederle M., Vesterlund L.: Do women shy away from competition? Do men compete too much?. Q J Econ 122, 1067–1101 (2007)

    Article  Google Scholar 

  • Nitzan S.: Modeling rent seeking contests. Eur J Polit Econ 10, 41–60 (1994)

    Article  Google Scholar 

  • Potters J., de Vries C., van Winden F.: An experimental examination of rational rent-seeking. Eur J Polit Econ 14, 783–800 (1998)

    Article  Google Scholar 

  • Schmidt, D., Shupp, R., Walker, J.: Resource allocation contests: experimental evidence. CAEPR Working Paper, No. 2006-004 (2006)

  • Schmitt P., Shupp R., Swope K., Cadigan J.: Multi-period rent-seeking contests with carryover: theory and experimental evidence. Econ Governance 5, 187–211 (2004)

    Article  Google Scholar 

  • Sheremeta R.M.: Experimental comparison of multi-stage and one-stage contests. Games Econ Behav 68, 731–747 (2010)

    Article  Google Scholar 

  • Sheremeta, R.M.: Contest design: an experimental investigation. Econ Inquiry (2010). doi:10.1111/j.1465-7295.2009.00274.x

  • Shogren J.F., Baik K.H.: Reexamining efficient rent-seeking in laboratory markets. Public Choice 69, 69–79 (1991)

    Article  Google Scholar 

  • Shupp, R.: Single versus multiple winner rent-seeking contests: an experimental investigation. Ball State University Working Paper (2004)

  • Skaperdas S.: Contest success functions. Econ Theory 7, 283–290 (1996)

    Google Scholar 

  • Tullock G.: The welfare costs of tariffs, monopoly and theft. Western Econ J 5, 224–232 (1967)

    Google Scholar 

  • Tullock G.: Efficient rent-seeking. In: Buchanan, J.M., Tollison, R.D., Tullock, G. (eds) Toward a Theory of Rent-Seeking Society, pp. 97–112. Texas A&M University Press, College Station (1980)

    Google Scholar 

Download references

Open Access

This article is distributed under the terms of the Creative Commons Attribution Noncommercial License which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.

Author information

Authors and Affiliations

  1. Haas School of Business, University of California, Berkeley, USA

    John Morgan

  2. Department of Economics, University of Mannheim, Mannheim, Germany

    Henrik Orzen

  3. School of Economics, University of Nottingham, Nottingham, UK

    Martin Sefton

Authors
  1. John Morgan
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Henrik Orzen
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Martin Sefton
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to John Morgan.

Additional information

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.

Rights and permissions

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.

Reprints and Permissions

About this article

Cite this article

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

Download citation

  • Received: 22 July 2008

  • Accepted: 20 May 2010

  • Published: 10 June 2010

  • Issue Date: October 2012

  • DOI: https://doi.org/10.1007/s00199-010-0544-z

Share this article

Anyone you share the following link with will be able to read this content:

Sorry, a shareable link is not currently available for this article.

Provided by the Springer Nature SharedIt content-sharing initiative

Keywords

  • Contests
  • Competition
  • Entry
  • Experiments

JEL Classification

  • C9
  • D4
  • D72

Working on a manuscript?

Avoid the common mistakes

Advertisement

Search

Navigation

  • Find a journal
  • Publish with us

Discover content

  • Journals A-Z
  • Books A-Z

Publish with us

  • Publish your research
  • Open access publishing

Products and services

  • Our products
  • Librarians
  • Societies
  • Partners and advertisers

Our imprints

  • Springer
  • Nature Portfolio
  • BMC
  • Palgrave Macmillan
  • Apress
  • Your US state privacy rights
  • Accessibility statement
  • Terms and conditions
  • Privacy policy
  • Help and support

Not affiliated

Springer Nature

© 2023 Springer Nature