Behavior in Contests

Roman Sheremeta

MPRA Paper from University Library of Munich, Germany

Abstract: Standard theoretical prediction is that rational economic agents participating in rent-seeking contests should engage in socially inefficient behavior by exerting costly efforts. Experimental studies find that the actual efforts of participants are significantly higher than predicted and that over-dissipation of rents (or overbidding or over-expenditure of resources) can occur. Although the standard theory cannot explain over-dissipation, this phenomenon can be explained by incorporating behavioral dimensions into the rent-seeking contest, such as (1) the utility of winning, (2) relative payoff maximization, (3) bounded rationality, and (4) judgmental biases. These explanations are not exhaustive, but they provide a coherent picture of important behavioral dimensions that should be considered when studying rent-seeking behavior in theory and in practice.

Keywords: rent-seeking; contests; experiments; overbidding; over-dissipation (search for similar items in EconPapers)
JEL-codes: C72 C91 C92 D72 D74 (search for similar items in EconPapers)
Date: 2014-07-01
New Economics Papers: this item is included in nep-exp, nep-gth, nep-hpe and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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