Research

Experimental Comparison of Multi-Stage and One-Stage Contests

Authors

Published

Games and Economic Behavior, vol. 68, pp. 731-747, 2010

Website

http://ideas.repec.org/a/eee/gamebe/v68y2010i2p731-747.html

Abstract

This article experimentally studies a two-stage elimination contest and compares its performance with a one-stage contest. Contrary to the theory, the two-stage contest generates higher revenue than the equivalent one-stage contest. There is significant over-dissipation in both stages of the two-stage contest and experience diminishes over-dissipation in the first stage but not in the second stage. Our experiment provides evidence that winning is a component in a subject's utility. A simple behavioral model that accounts for a non-monetary utility of winning can explain significant over-dissipation in both contests. It can also explain why the two-stage contest generates higher revenue than the equivalent one-stage contest.

Roman Sheremeta