Entry in contests with incomplete information: Theory and experiments

Diego Aycinena and Lucas Rentschler

European Journal of Political Economy, 2019, vol. 60, issue C

Abstract: This paper studies entry decisions in contests with private values. Potential contestants observe their value and the common opportunity cost of entry, and make entry decisions simultaneously. Theory predicts that whether or not contestants are informed of the number of entrants prior to choosing their expenditures has no effect on entry or aggregate expenditures. We test these assertions in our experiments. We find substantial over-entry in both information structures. However, entry is higher when contestants are informed. Since expenditures do not, on average, differ across information structures, aggregate expenditure is also higher when contestants are informed. Contestants earn on average less than the opportunity cost of entry.

Keywords: Contests; Endogenous entry; Experiments (search for similar items in EconPapers)
JEL-codes: C9 D4 D72 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:60:y:2019:i:c:s0176268017303890

DOI: 10.1016/j.ejpoleco.2019.07.001

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