Resource Allocation Contests: Experimental Evidence
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Date
2006-08-29
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Center for Applied Economics and Policy Research
Abstract
Across many forms of rent seeking contests, the impact of risk aversion on
equilibrium play is indeterminate. We design an experiment to compare individuals’ decisions across three contests which are isomorphic under risk-neutrality, but are typically not isomorphic under other risk preferences. The pattern of individual play across our contests is not consistent with a Bayes-Nash equilibrium for any distribution of risk preferences. We show that replacing the Bayes-Nash equilibrium concept with the quantal response equilibrium, along with heterogeneous risk preferences can produce equilibrium patterns of play that are very similar to the patterns we observe.
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CAEPR, Center for Applied Economics and Policy Research, rent seeking, experiments, risk aversion, game theory
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Working Paper