Contests: Theory and Evidence

Transcription

1 Contests: Theory and Evidence A Conference Organized by the Centre for Behavioural and Experimental Social Science University of East Anglia, Norwich, UK May 23-24, 2016

2 Local Hosts Subhasish M. Chowdhury Paul Gorny Anwesha Mukherjee Ted Turocy

3 CBESS Conference on Contests: Theory and Evidence 2016 May 23-24, The King s Centre, Norwich, UK Program Summary 23 May (Monday) Registration Welcome note Parallel sessions 1 and 2 (3 presentations + 3 presentations) Break Plenary session (2 presentations) Lunch Parallel sessions 3 and 4 (4 presentations + 4 presentations) Break Parallel sessions 5 and 6 (3 presentations + 3 presentations) Dinner 24 May (Tuesday) Late Registration Parallel sessions 7 and 8 (3 presentations + 3 presentations) Break Keynote (1 presentation) Lunch Parallel sessions 9 and 10 (4 presentations + 4 presentations) Break Parallel sessions 11 and 12 (3 presentations + 3 presentations) Dinner To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 1

4 Program Schedule Registration 23 May (Monday) Welcome note: Ted Turocy and Subhasish M. Chowdhury, UEA Parallel sessions 1 and 2 Session 1 (Room 1): Risk and Contests Chair: Sara Godoy, UEA 1 Håkan J. Holm (Lund): Risk Seeking and Effort in Contests An Experiment 2 Dmitry Ryvkin (Florida State): The Effects of Peer Information and Incentives on Risk-taking An Experimental Study 3 Zhuoqiong Chen (LSE): Heterogeneous Risk/Loss Aversion in Complete Information All-Pay Auctions Session 2 (Room 2): Property Rights Chair: Shaun Hargreaves Heap, King s Colle 1 Bharat Goel (IIM-Cal): Value Creation vs. Appropriation, and the Evolution of Property Rights 2 Dan Kovenock (Chapman): Anchoring, Status Quo Bias, and Conflict 3 Joo Young Jeon (UEA): Property Rights And Loss Aversion in Contests Break Plenary session: Plenary Session: Contest Research Beyond Economics (Room 1) Chair: Dan Kovenock, Chapman 1 Yaakov Kareev (HUJI): Aspects of Uncertainty in Competition 2 Ian Hardy (Nottingham): Contests in wasps and other animals: theory and evidence Lunch Parallel sessions 3 and 4 Session 3 (Room 1): All-Pay Auction Chair: Abhijit Ramalingam, UEA 1 Jingfeng Lu (NUS): Ranking Disclosure Policies in All-Pay Auctions with Incomplete Information 2 Theodore Turocy (UEA): Tu mihi soli Places: An Experiment on the Competitiveness of All-Pay Auctions with Private Information Session 4 (Room 2): Tullock Contests Chair: Santiago Sanchez Pages, U Barcelona 1 Karl Wärneryd (Stockholm): Chaotic Dynamics in Contests 2 Lambert Schoonbeek (Groningen): Information and Endogenous Delegation in a Rent-Seeking Contest To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 2

5 3 Matthias Dahm (Nottingham): The All-Pay Auction with Extra Prize: A Partial Exclusion Principle 4 Ivan Pastine (UCD): Equilibrium Existence and Expected Payoffs in All-Pay Contests with Constraints 3 Marcin Waligora (Cologne): Desire to Win Drives Overbidding in Tullock Contests 4 Anwesha Mukherjee (UEA): Framing drives overbidding in Rent-seeking experiments Break Parallel sessions 5 and 6 Session 5 (Room 1): Group Contests Chair: Katarina Dankova, UEA 1 Maria Cubel (Barcelona): Difference-Form Group Contests 2 Benoît S Y Crutzen (Rotterdam): Collective Contests with Multiple Indivisible Prizes 3 Felix Kölle (Cologne): Not All Groups are Created Equal: Asymmetric Group-Contests Session 6 (Room 2): Dynamic Contests Chair: David Rojo-Arjona, Leicester 1 Aner Sela (Ben Gurion): Two-Stage Contests with Effort-Dependent Rewards 2 Pau Balart (UIB): Sequential Choice of Sharing Rules in Collective Contests 3 Martin Grossmann (Zürich): Dynamic Models with Heterogeneous Agents: The Case of Contests Dinner (Loch Fyne Restaurant) Late Registration Parallel sessions 7 and 8 24 May (Tuesday) Session 7 (Room 1): Peer Effects and Retaliation Chair: Peter Moffatt, UEA 1 Dana Sisak (Rotterdam): Peer Evaluation and Team Performance: An Experiment on Complex Problem Solving 2 Kosmas Marinakis (HSE): Incentives Under Peer Effects: A Field Experiment 3 Simone Quercia (Bonn): Affirmative Action, Consolation Prizes and Retaliation in Experimental Contest Games Session 8 (Room 2): Electoral and Market Campaigns Chair: Ted Turocy, UEA 1 Tuvana Pastine (Maynooth): Incumbency Advantage in an Electoral Contest 2 Orestis Troumpounis (Lancaster): Linking Individual and Collective Contests through Noise Level and Sharing Rules 3 Rudi Stracke (LMU): Competing for Market Shares: Why the Order of Moves Matters Even When It Shouldn t To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 3

6 Break Keynote speech Keynote speech: (Room 1) Chair: Henrik Orzen, Mannheim Kai Konrad (MPI Munich): To deter or to moderate? Alliance formation in contests Lunch Parallel sessions 9 and 10 Session 9 (Room 1): Contest Design Chair: Michael Brock, UEA 1 Marco Serena (MPI Munich): Harnessing Beliefs to Stimulate Efforts 2 Florian Lindner (Innsbruck): Sorting and Selection Effects in Tournament Mechanisms: An Experimental Investigation 3 Igor Letina (Zürich): Designing Innovation Contests for Diversity 4 Francesco Trevisan (Edinburgh): Optimal Prize Allocations in Group Contests Session 10 (Room 2): Conflict and Rent-Seeking Chair: Orestis Troumpounis, Lancaster 1 Alexander Matros (Lancaster): Lotteries with Fixed Number of Tickets 2 Ayse Gül Mermer (Manchester): Contests with Expectation-Based Loss-Averse Players 3 Alberto Vesperoni (Siegen): Linking Conflict to Inequality: The Gini Index as a Measure of Rent Dissipation 4 Paul M. Gorny (UEA): It s Dog Eat Dog - A Model of Multiple Pairwise Contests Break Parallel sessions 11 and 12 Session 11 (Room 1): Behavioral aspects Chair: Judith Avrahami, HUJI 1 Simon Dato (Bonn): Compensation and Honesty: Gender Differences in Lying 2 Martin Sefton (Nottingham): Disappointment Aversion and Interpersonal Comparisons in Tournaments 3 Francesco Fallucchi (UEA): Learning in Rent- Seeking Contests Session 12 (Room 2): Theory and Experiments Chair: Sang-Hyun Kim, UEA 1 Subhasish M. Chowdhury (UEA): Group Size and Matching Protocol in Contests 2 Astrid Gamba (Milan): Mis-Judging Merit: Theory and Experimental Evidence on Adjudication Errors in Contests 3 Lucas Rentschler (Francisco Marroquín): Endogenous Entry in Contests with Incomplete Information: Theory and Experiments Dinner (Ali Tandoori) To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 4

7 Some Useful Information Conference Venue etc. The conference will be held at the King s Centre (63-75 King Street, Norwich NR1 1PH, UK: in the heart of the Norwich city centre. Room 1 in the schedule is the Conference Room 1 and Room 2 is the Conference Room 2. Those are located at the 1 st floor (in the British system i.e., 2 nd floor in the American system). There is a back-room to keep luggage etc. next to Conference Room 1. Coffee etc. will be served at the corridors between the two rooms (except the inauguration drinks that will be served in Room 1). Lunches will be served in Room 1. Search for The Kings Centre WiFi and at the Log in screen click Continue to the Internet. Transport Norwich is well connected by train and bus with London, and by flight with Amsterdam. The conference venue is really a walking distance from both the train and the bus station. Local Bus: There are two buses (number 25 and 26) that depart from the railway station. You will have to get down at the Castle Meadow stop to go to the conference venue. Taxis: It is advisable to book taxis early on over phone. Some of the local taxis are: Goldstar: , Five Star: , ABC: Accommodation suggestions a 5-6 minutes walk to the conference venue, not a budget option. just next to the train station and is 6-7 minutes walk. a 4 minutes walk and one of the cheapest no-frill option. Conference Dinners The dinner on Monday (23 rd ) will be at the Loch Fyne Seafood and Grill Restaurant ( ). The dinner on Tuesday (24 th ) will be at Ali Tandoori ( Both are of walking distances from the conference venue. Ask a local host for directions! Misc. There are very many shops, ATMs and restaurants around the conference venue. In case you have not already been there, take some time out exploring the two Cathedrals, numerous medieval churches, the Castle, the Elm Hill and the Riverside in Norwich they all are walking distances from the conference venue / hotels. Norwich, in general, is a pretty safe city. In case of any concern, simply ask a local host! To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 5

8 Details of the Presentations Day 1: 23 rd May (Monday) Parallel Session 1 (Room 1): Risk and Contests (Chair: Sara Godoy, University of East Anglia) Presentation 1: Risk Seeking and Effort in Contests An Experiment Presenter: Håkan J. Holm Co-authors: Ola Andersson and Erik Wengström Abstract: We conduct a rank order tournament experiment where participants can invest in both variance (risk seeking) and mean (effort) of an uncertain outcome variable. In line with Hvide (2002) we find evidence of risk seeking. Furthermore, both effort and risk seeking can be monitored with a three level prize scheme as suggested by Gilpatric (2009). However, the monitoring is imperfect and the observed behavior is characterized by inertia. The prize scheme where only one loser is punished appears superior since it is associated with relatively high effort and low risk seeking at the same time as it is most popular. Presentation 2: The Effects of Peer Information and Incentives on Risk-taking: An Experimental Study Presenter: Dmitry Ryvkin Co-authors: Philip Brookins and Jennifer Brown Abstract: It is generally believed that competitive pay schemes encourage more risk-taking than comparable noncompetitive pay schemes. However, in addition to incentives, risk-taking in the workplace may be driven by other factors, such as the organizational culture and norms arising from the availability of information about the risk-taking strategies of one s peers. We use a laboratory experiment to explore how the availability of various types of peer feedback affects risk-taking with and without competitive incentives. Although, on average, subjects take more risk under competitive incentives, the magnitude and direction of the effect depend substantially on the type of feedback they receive. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 6

9 Presentation 3: Heterogeneous Risk/Loss Aversion in Complete Information All-pay Auctions Presenter: Zhuoqiong (Charlie) Chen Co-authors: David Ong and Ella Segev Abstract: We extend previous theoretical work on m-players, complete information all-pay auctions to incorporate heterogeneous risk and loss averse utility functions. We provide sufficient and necessary conditions for the existence of any equilibrium and characterize all possible equilibria. Focusing on the equilibria in which all active players randomize continuously between zero and the valuation, we found, surprisingly, that when players are heterogeneous in their risk/loss aversions, the more risk/loss averse players either dropout or bid higher than the less risk/loss averse players. Moreover, any player s expected effort decreases with others risk/loss aversion while increases with her own risk/loss aversion. If the risk aversion of the player whose risk aversion is lower (higher) than average is increased, then total expected bid increases (decreases). When there are only two types of risk aversions, we show sufficient conditions for total expected bid to increase with the share of the more risk averse players. Our findings motivate controlling for risk aversion in the design of personnel and educational contests. We discuss implications for gender mixture (assuming that gender is a signal for risk attitude) effects on players exerted efforts. Parallel Session 2 (Room 2): Property Rights (Chair: Shaun Hargreaves Heap, King s College London) Presentation 1: Value Creation vs. Appropriation and the Evolution of Property Rights Presenter: Bharat Goel Co-author: Arijit Sen Abstract: Weak property rights encourage rival value appropriation vis-a-vis own value creation. But value destruction due to appropriative conflicts can encourage collective action towards improving property rights. We consider two countries (communities), initially situated in anarchy, differentially-endowed in initial resources, and populated by a sequence of generations. In every generation, the countries myopic citizens nudge the inherited property rights regime by mutual consent, and then decide on value creation vs. appropriation. When initial resource inequality is low (high) and/or past consumption (productive investment) is the major force behind resource growth, perfect property rights (anarchy) can emerge in the long-run. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 7

10 Presentation 2: Anchoring, Status Quo Bias and Conflict Presenter: Dan Kovenock Co-author: Alan Gelder Abstract: The institutional structure of conflict plays an important role in determining the degree to which scarce resources are dissipated throughout the course of a conflict. We consider conflicts where players simultaneously expend scarce resources in order to obtain a rent, and specifically focus on the role of whether the rent is a pure transfer across players from an initial status quo, or whether the rent potentially yields a weak Pareto improvement upon the status quo cases we refer to respectively as rent-seeking and rent-sharing. Modeling conflict as an all-pay auction with ties, resource expenditures are treated as non-recoverable bids where a player obtains the complete rent by exceeding the other player s bid by a given differential. Otherwise, the rent is evenly split (i.e. no transfer under rent-seeking, and an improvement on the status quo for both players under rent-sharing). We experimentally compare the rent-seeking and rent-sharing paradigms for two bid differentials. Behaviorally, anchoring in the rent-seeking treatments leads subjects to overly emphasize the value of splitting the rent. Reduced expenditures in the rent-seeking versus rentsharing treatments, together with the role of a bid differential in maintaining persistently low bids, have practical implications for constitutional design, political dynamics, and conflict resolution. Presentation 3: Property Rights and Loss Aversion in Contests Presenter: Joo Young Jeon Co-authors: Subhasish M. Chowdhury and Abhijit Ramalingam. Abstract: We analyse theoretically and experimentally the effects of property rights on contest outcomes. In standard contest experiments, subjects start with no prize and they are allowed to bid for a possible prize. We keep this frame as a baseline but include two further cases to invoke property rights. In one case we allow the subjects to start with prizes, which they can lose if they lose the contest. In the other case one of the subjects starts with a prize whereas the other subject starts with no prize. Whereas standard expected utility theory predicts the same bid in these treatments, a theory with loss aversion predicts clear ranking of bids across treatments. The experimental results provide support for loss aversion when property rights are introduced in contests. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 8

11 Plenary Session (Room 1): Contest research beyond Economics (Chair: Dan Kovenock, Chapman) Presenter: Yaakov Kareev Presentation 1: Aspects of Uncertainty in Competition Co-authors: Judith Avrahami and Einav hart Abstract: Organisms human and non-human alike invest their limited resources in order to be able to face competitions with their peers. This is true both of the weaker and of the stronger organisms: Because there is uncertainty as to when, where, or on what facet competition will be resolved, not only the strong but also the weak stand a chance to win. We study the effects of such uncertainty on the behavior of human subjects. In a series of studies involving either constantor non-constant sum contests we find that subjects are sensitive to their relative standing and to the uncertainty regarding their evaluation. Moreover, when subjects can choose what level of effort they invest in the competition they invest more in uncertain than in certain competitions. Presentation 2: Contests in wasps and other animals: theory and evidence Presenter: Ian Hardy Abstract: Animal contest behaviour was one of the original foci of the emerging field of behavioural ecology and research in this area greatly stimulated the adoption (from behavioural economics) of the game theoretic modelling approach to studying animal behaviour in general. Animals are not assumed to have rational forethought but natural selection prevents the evolution of low payoff strategies. Models of (mainly dyadic) contest behaviour are now well developed within behavioural ecology and have also been tested on a very wide range of species. A common scenario is the owner-intruder contest in which two individuals compete for an indivisible resource. Models predict that contest outcome will be influenced by differences in the resource holding power of the competitors (with both intrinsic and extrinsic components) and by the value that each competitor places on possession of the contested resource. I will summarise results from a series of empirical studies on parasitoid wasps that illustrate how each of these components influences contests and also that contest behaviour can modified by inter-contestant genetic relatedness. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 9

12 Parallel Session 3 (Room 1): All-Pay Auction (Chair: Abhijit Ramalingam, University of East Anglia) Presentation 1: Ranking Disclosure Policies in All-Pay Auctions with Incomplete Information Presenter: Jingfeng Lu Co-authors: Hongkun Ma and Zhe Wang Abstract: In this paper, we study information disclosure policies in all-pay auctions with incomplete information. There are two symmetric players whose values can be high or low, which are their private information. The contest organizer observes the players values ex post, and she can commit ex ante to four different symmetric information policies exhaustively. First, she can always disclose publicly the types of the players regardless. Second, she can conceal the types of the players regardless. Third, she can disclose publicly the players types if and only both are of high type. Fourth, she can disclose publicly the players types if and only both are of low type. We characterize explicitly the unique equilibrium for every scenario. Based on the equilibrium analysis, we are able to completely rank the four disclosure policies by the expected effort induced and players expected payoffs. We find that the full concealment policy extracts the highest aggregate expected efforts, which is followed by the policy of disclosing types if and only if both are high, and the policy of disclosing types if and only if both are low induces the least total expected effort. The players enjoy the highest expected payoffs under the policy of disclosing types when both are low, and all other three policies render the same expected payoffs to the players. Presentation 2: Tu mihi soli Places: An Experiment on the Competitiveness of All-Pay Auctions with Private Information Presenter: Theodore L. Turocy Co-authors: Lucas Rentschler Abstract: In all-pay auctions with affiliated types, the implications of being of a higher type can be complex. Having a high assessment of the value of the prize is good news, but only if the other participants in the contest are not too likely to believe the same. In a laboratory experiment, we study behavior in both private-values and common-values settings. We vary the degree of correlation between types. While bidding is consistently aggressive across treatments, we find To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 10

13 general support of the comparative statics of Bayes-Nash equilibrium for private values. In contrast, behavior in common values settings in which bidders have very noisy information about the value of the prize differs greatly from the equilibrium predictions. Presentation 3: The All-Pay Auction with Extra Prize: A Partial Exclusion Principle Presenter: Matthias Dahm Abstract: We consider the (first-price) all-pay auction under complete information for which it is well known that the exclusion principle applies (Baye, Kovenock and de Vries, 1996): the contest organizer might benefit form excluding the strongest contestant. We consider a setting with one high-ability and two low-ability contestants and analyse the effects of partial exclusion of the highability contestant. The contest organizer splits the prize; all contestants compete for the main prize, but only low-ability agents can win the extra prize. We show that for any difference in abilities an extra prize equal to the relative difference in abilities yields strictly higher expected total effort than the complete exclusion of the high-ability agent. Partial exclusion benefits the organizer more than complete exclusion. Presentation 4: Equilibrium Existence and Expected Payoffs in All-Pay Contests with Constraints Presenter: Ivan Pastine Co-author: Tuvana Pastine Abstract: We examine all-pay auctions with endogenous entry. Potential bidders observe both their private value and a common entry cost. Entry decisions are made simultaneously. Theory predicts that whether or not bidders are informed of the number of entrants prior to placing bids has no effect on entry or expected revenue, and we test these assertions in our experiments. We find substantial over-entry in both information structures. However, entry is higher when bidders are informed. Since bidding behavior does not, on average, differ across information structures, revenue is also higher when bidders are informed. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 11

14 Parallel Session 4 (Room 2): Topics in Tullock Contests (Chair: Santiago Sanchez Pages, University of Barcelona) Presenter: Karl Wärneryd Presentation 1: Chaotic Dynamics in Contests Abstract: Under myopic best-response dynamics, a standard Tullock contest can exhibit chaotic behavior. This may, among other things, aid our understanding of experimental data. Presentation 2: Information and Endogenous Delegation in a Rent-Seeking Presenter: Lambert Schoonbeek Abstract: We consider a two-player rent-seeking contest for a prize of common value. The players only know that the prize is high or low, with given probabilities. Each player can hire a delegate to act on his behalf. After a delegate is hired, she privately observes the true value of the prize. In this setup, we demonstrate that delegation can occur in equilibrium. We derive the conditions under which, respectively no player, only one player, or both players delegate in equilibrium. Presentation 3: Desire to Win Drives Overbidding in Tullock Contests Presenter: Marcin Waligora Co-authors: Bettina Rockenbach Abstract: The robust finding of overbidding in experimental rent-seeking contests (Tullock 1980) fuels a vivid discussion on its causes (Sheremeta 2013). We contribute to this discussion by reporting a series of experiments on rent-seeking contests. We show that contestants hold myopic beliefs and match their bid with the competitor s believed bid. The resulting linear reaction function substantially differs from the theoretic best-reply function and causes overbidding. A systematic study of contests with symmetric and asymmetric bidding costs allows us to discriminate between the prevalent explanations for overbidding. Our results clearly support the desire to win as the dominant motive for overbidding. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 12

15 Presentation 4: That s the ticket: Explicit lottery randomisation and learning in Tullock contests Presenter: Anwesha Mukherjee Co-authors: Subhasish M. Chowdhury and Theodore L. Turocy Abstract: We experimentally contrast mathematical versus operational explanations of Tullock lottery contests. We contrast a protocol explaining the contest in terms of probability of winning, with an operational approach that carries out the random component of the contest as an explicit lottery each period. Initial expenditure levels are significantly lower when using the operational approach. In addition, using the operational approach, groups far from equilibrium in a given period move more rapidly towards approximate mutual best response. We find these results in sessions conducted in the UK and in the US. The implications that can be drawn from experiments on contest games therefore depend on the approach used to present the game to the players. Parallel Session 5 (Room 1): Group Contests (Chair: Katarina Dankova, University of East Anglia) Presenter: Maria Cubel Co-author: Santiago Sanchez-Pages Presentation 1: Difference-form Group Contests Abstract: Contests are situations in which a set of agents compete for a valuable object, rent or award. The present paper analyzes difference-form group contests, that is, contests fought among groups and where their probability of victory depends on the difference of their effective efforts. First, we show that the non-existence of pure-strategy equilibria and the monopolization results obtained in previous analysis of difference-form contests rest critically on the assumption of a linear cost of effort. Under exponential costs, we show that pure strategy equilibria exist in a large set of cases and that more than one group can expend positive effort in equilibrium. Second, we show that inequality of valuations of victory within groups hinders their chances of prevailing in the contest. If possible; members may find beneficial to engage in progressive redistribution within their group. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 13

16 Presentation 2: Collective Contests with Multiple Indivisible Prizes Presenter: Benoit S Y Crutzen Co-author: Sabine Flamand Abstract: We study a contest between two teams of individuals who compete for multiple indivisible prizes. Teams compete for prizes on the basis of total effort provided by their members. We propose a novel inter-team allocation mechanism for these prizes. We consider three intraparty prize allocation rules to pin down which team members receive one of the prizes their team won: an effort independent but anonymous (and thus egalitarian or random) allocation rule; another effort independent but non anonymous rule based on member characteristics such as name, gender, seniority or geographic origin; and a competitive, purely effort-based rule. We show that the competitive allocation rule dominates the other two rules in terms of total effort provision. We also compare our contest to a team contest for a single, fully divisible prize and consider several other extensions of our basic model, including altruism, the impact of aggregate noise in the interteam prize allocation mechanism and the presence of more than two teams. Presentation 3: Not All Groups are Created Equal: Asymmetric Group-Contests Presenter: Felix Kölle Co-author: Francesco Fallucchi, Enrique Fatas and Ori Weisel Abstract: Conflicts and contests often not only occur between individuals but rather between groups; and groups typically differ with respect to a variety of characteristics. This leads to asymmetric contests, a topic that has gained only little attention so far. In this paper, we experimentally investigate the effects of within-group heterogeneity with regard to individuals capability to compete, on between-group competition. We find that (i) conflicts tend to be more violent between heterogeneous groups than between homogeneous groups, and (ii) homogeneous groups and high capability players behave more aggressively in asymmetric contests than in symmetric contests. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 14

17 Parallel Session 6 (Room 2): Dynamic Contests (Chair: David Rojo-Arjona, University of Leicester) Presenter: Aner Sela Presentation 1: Two-Stage Contests with Effort-Dependent Rewards Abstract: We study two-stage all-pay contests where there is synergy between the stages. The reward for each contestant is fixed in the first stage while it is effort-dependent in the second one. We assume that a player's effort in the first stage either increases (positive synergy) or decreases (negative synergy) his reward in the second stage. The subgame perfect equilibrium of this contest is analyzed with either positive or negative synergy. We show, in particular, that whether the contestants are symmetric or asymmetric their expected payoffs may be higher under negative synergy than under positive synergy. Consequently, they prefer smaller rewards (negative synergy) over higher ones (positive synergy). Presentation 2: Sequential Choice of Sharing Rules in Collective Contests Presenter: Pau Balart Co-author: Sabine Flamand and Orestis Troumpounis Abstract: Groups competing for a prize need to determine how to distribute it among their members in case of victory. We show that the timing of such groups internal organization has important implications that depend on the nature of the prize. When the prize is sufficiently private both groups actively take part in the competition and switching from a simultaneous to a sequential timing where the small group is the leader consists in a Pareto improvement and reduces aggregate effort expenditures. On the contrary, when the large group is the leader aggregate effort increases. These differences stem from the fact that while the sharing rules are strategic complements from the perspective of the large group, they are strategic substitutes from the perspective of the small one. When the prize is not private enough, only the large group is active in the competition and switching from a simultaneous to a sequential timing may reverse the results in terms of aggregate effort. Interestingly, the sequentiality of moves eliminates the group size paradox regardless of the leader's size, hence the small group never outperforms the large one even when it has the leadership advantage. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 15

18 Presentation 3: Dynamic Models with Heterogeneous Agents: The Case of Contests Presenter: Martin Grossmann Co-author: Andreas Hefti Abstract: Analyzing economic models with possibly many arbitrarily heterogeneous agents is an elusive task already in the static case, and even more so in dynamic settings. We propose a novel, systematic approach to analyze such models building on the notion of aggregate-taking behavior. The usefulness of this approach is demonstrated by analyzing a two-stage contest. Our new set of tools allows us to study how changes in the contest design, particularly variations the prize structure or the intensity of the contest, affect the distribution of the equilibrium success chances and profit inequality, without the need to resort to Computer simulations. Day 2: 24 th May (Tuesday) Parallel Session 7 (Room 1): Peer Effects and Retaliation (Chair: Peter Moffatt, University of East Anglia) Presentation 1: Pear Evaluation and Team Performance: An Experiment on Complex Problem Solving Presenter: Dana Sisak Co-author: John Morgan and Susanne Neckermann Abstract: In today's business environment, employees are increasingly faced with problems for which objective measures of team performance are not available immediately, let alone information on individual agents performance. To date, we know very little about how to foster performance in complex, team-based tasks without immediate performance measures. This paper has three main contributions; we study individual and group performance on a complex task and provide insights into how individuals interact in solving such problems in a team. Second, we provide evidence on a particular way of eliciting effort that is not based on immediate performance measures: payoff relevant peer evaluation. Third, we present a novel task to study the issue: guesstimations. We find 1) that the treatment worked in the sense that agents perceptions of the work environment were significantly affected by the treatments. 2) There is, however, no performance effect of the peer evaluation, suggesting that in complex tasks the relationship between incentives and output might be less straightforward than in simple tasks. 3) We look To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 16

19 deeper into group decision making and in particular into the relationship between individual guesses and later group outcomes. We find that group performance is significantly better than the median guess, but at the same time significantly worse than the best guess. This suggests that individuals in complex tasks might tend to converge to the middle, rather than being able to build on one another. Presentation 2: Incentives under Peer Effects: A Field Experiment Presenter: Kosmas Marinakis Abstract: The paper contrasts a relative to an absolute performance evaluation method within an experimental environment. The experiment compares students performance under the two alternative grading methods in two separate college classes. The baseline results indicate that the traditional absolute method provides better incentives to students than an ex ante announced curve. Moreover, the experiment surprisingly shows that higher power incentive schemes, through relative performance evaluation, may consistently result in lower effort levels by the students. A possible reason is the existence of strong peer effects amongst students. A theoretical model consistent with this claim is developed in the paper. All results indicate that peer effects may play a special role in the determination of the superior evaluation method in agency theory. Presentation 3: Affirmative Action, Consolation Prizes and Retaliation in Experimental Contest Games Presenter: Simone Quercia Co-author: Francesco Fallucchi Abstract: We conduct a real-effort experiment to test the effects of a novel affirmative action policy in rent-seeking contests that reserves a share of the prize to subjects of a disadvantaged category. We compare entry in a standard contest with only one prize versus an affirmative action contest, where a share of the prize is reserved to participants with an (exogenous) productivity disadvantage. We find that the affirmative action contest increases entry of players from the disadvantaged category without affecting entry of advantaged players. Moreover, the introduction of the policy does not negatively affect performance of both advantaged and disadvantaged players. We test whether the possibility of costly retaliation in the form of destruction of a share of the prizes has an impact on the effectiveness of the affirmative action policy. We find that this possibility can undermine the benefits of the affirmative action policy suggesting that retaliation is an important aspect to consider when implementing such policies. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 17

20 Parallel Session 8 (Room 2): Electoral and Market Campaigns (Chair: Ted Turocy, University of East Anglia) Presenter: Tuvana Pastine Presentation 1: Campaign Spending in Congressional Elections Co-author: Matt Cole and Ivan Pastine Abstract: In a campaign spending contest framework, we investigate the potency of frequently cited sources of incumbency advantage in generating the observed patterns of campaign expenditure and reelection rates. Since one dollar of extra spending should not change a certain loser to a certain winner, we extend the literature by allowing the electoral benefit of visibility to be stochastic. Officeholders' free media exposure alone is unable to match empirical regularities. Incumbents' superior fundraising efficiency is the key to generating the observed patterns. The model also provides an explanation of earlier empirical findings that district variation in the cost of visibility does not influence incumbents' victory probability. Furthermore, in contrast to previous literature, the model predicts that campaign finance legislation can increase challengers' expected payoffs. Presentation 2: Linking Individual and Collective Contests through Noise Level and Sharing Rules Presenter: Orestis Troumpounis Co-authors: Pau Balart, and Subhasish M. Chowdhury Abstract: We provide a theoretical link between the two most prominent ways of modeling individual and collective contests as proposed by Tullock (1980) and Nitzan (1991) respectively. By introducing Nitzan's sharing rule as a way of modeling individual contests we obtain a contest success function nesting a standard Tullock contest and a fair lottery. We first provide an equivalence result between the proposed contest and Tulllock's contest for the two-player set-up. We then employ this nested contest as a way of introducing noise in multi-player contests when in the Tullock contest a closed form solution for the equilibrium in pure strategies does not exist. We conclude by comparing the proposed contest with the existing ones in the literature. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 18

21 Presentation 3: Competing for Market Shares: Why the Order of Moves Matters Even When It Shouldn't Presenter: Rudi Stracke Co-author: Tanja Hörtnagl and Rudolf Kerschbamer Abstract: This paper analyzes a contest for market shares where two homogeneous firms compete by investing either simultaneously or sequentially. Standard theory predicts that equilibrium investments and payoffs are independent of the order of moves. To test this prediction, we implement two treatments in the lab, one where firms chose investments simultaneously, and one where they invest sequentially. Our results suggest that it is an inherent advantage to move second rather than first even in the absence of strategic concerns. This is so because first movers face strategic uncertainty, while second movers have the power to ultimately determine relative payoffs through their investment choices. This power is particularly valuable in our experiments, since many first movers try to establish a collusive outcome and second movers not only care about own monetary earnings, but also about relative standing vis-a-vis the first mover. Keynote speech (Room 1) (Chair: Henrik Orzen, University of Mannheim) Presentation: To Deter or to Moderate? Alliance Formation in Contests Presenter: Kai A. Konrad Co-author: Florian Morath Abstract: We consider the formation of alliances ahead of conflict in a framework with incomplete information about the strength of co-players. When deciding on alliance formation, players anticipate the self-selection of other players and the informational value of own and other players choices. In the absence of these signaling effects, strong players have an incentive to stand alone, which leads to a separating equilibrium. This separating equilibrium can be destabilized by deception incentives if beliefs are updated on the basis of endogenous alliance formation choices. Weak players may find it attractive to appear strong in order to deter competitors from positive effort choices. Strong players may find it attractive to appear weak in order to give their competitors a false sense of security and then beat them with little effort. Moreover, appearing weak allows players to free-ride when alliances are formed. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 19

22 Parallel Session 9 (Room 1): Contest Design (Chair: Michael Brock, University of East Anglia) Presenter: Marco Serena Presentation 1: Harnessing Beliefs to Stimulate Efforts Abstract: A contestant s effort depends on her knowledge of her rival s type. This knowledge is often limited in real-life contests. I propose a model where the principal of a contest has commitment power to verifiably disclose contestants types. What is the optimal disclosure policy to stimulate contestants efforts? Full disclosure spurs more (less) efforts than full concealment if the distribution of types is skewed towards high (low) types. However, if the principal can also partially disclose types, both full disclosure and full concealment are outperformed by a particular form of partial disclosure, regardless of the skewness of the distribution of types; this is achieved by disclosing the signal which is best for the principal (i.e. all contestants are high types) and concealing the rest. Presentation 2: Sorting and Selection Effects in Tournament Mechanisms: An Experimental Investigation Presenter: Florian Lindner Co-author: Glenn Dutcher and Dmitry Ryvkin Abstract: In this paper we utilize optimal contracts in a Lazear-Rosen tournament to experimentally examine how the selection of an incentive mechanism by managers and, likewise, the self-selection into a mechanism by employees, affect employee output. Depending on the treatment, those assigned the role of a principal or an agent could choose between two theoretically equivalent tournaments: a reward tournament, where one agent receives the top prize, or a punishment tournament, where one agent receives the bottom prize.zh We find that agents prefer the punishment tournament more than the reward. By classifying the agents within three different competitiveness types, we observe that middle agents are indifferent between the two tournament mechanisms, whereas high and mainly low types sort into the punishment tournament. We also compare effort levels between the two treatments and find a negative (positive) selection effect on effort in the reward (punishment) mechanism. Finally, efficiency is higher when agents can select their preferred mechanism. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 20

23 Presenter: Igor Letina Co-author: Armin Schmutzler Presentation 3: Designing Innovation Contests for Diversity Abstract: This paper analyzes the design of innovation contests when the quality of an innovation depends on the research approach of the supplier, but the best approach is unknown. Diversity of approaches is desirable because it generates an option value. In our main model with two suppliers, the buyer optimally uses a bonus tournament, where suppliers can choose between a low bid and a high bid. This allows the buyer to implement any level of diversity with the lowest revenue for the suppliers. We also compare other common contests, in particular, fixed-prize tournaments and auctions. Like bonus tournaments, auctions implement the socially optimal diversity, but usually with higher rents for the suppliers. Fixed-prize tournaments implement insufficient diversity, but may nevertheless be preferred by the buyer to auctions because of lower supplier rents. Presenter: Francesco Trevisan Presentation 4: Optimal Prize Allocations in Group Contests Abstract: We study how the group aggregate effort in contests depends on the degree of heterogeneity in ability between group members. First, we show how this analysis depends on the steepness of the cost function. Second, we provide an optimal prize allocation that maximizes groups total effort relaxing the common assumption of symmetry among players. A team manager who wants to maximise the effort of her group faces three cases: if the marginal cost function is concave, then she should maximize the variance in ability and allocate the whole prize to the most able player; if the marginal cost function is convex and not too steep, then she should maximize the variance in ability and allocate a positive share of the prize to all group members; if the marginal cost function is convex and sufficiently steep, then she should minimize the variance in ability and allocate a positive share of the prize to all group members. In the two latter cases the prize allocation depends on the degree of heterogeneity in ability between players. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 21

24 Parallel Session 10 (Room 2): Conflict and Rent-seeking (Chair: Orestis Troumpounis, Lancaster University) Presenter: Alexander Matros Presentation 1: Lotteries with Fixed Number of Tickets Abstract: A fixed-prize lottery (or a raffle) is a mechanism employed by many charity organizations to raise money to fund public goods or charitable work. This study shows how many tickets should be issued for sale if participants care not only about a fixed prize but also a public good. We assume that the prize value is the same for all participants, but each participant has her private marginal per capita return (MPCR) from the public good provision. The designer knows only the range and the distribution function for these private MPCRs and wants to maximize private good provision. First, the designer announces the number of tickets for sale, then, in turn, participants make their decisions about the number of tickets they want to buy. There is a tradeoff here: if the designer issues too few tickets for sale, then the collection from the sale of tickets would suffer. However, if too many tickets are issued for sale, then it could be the case that not all (if any) the tickets get sold implying a wastage of resources in issuing the unsold extra tickets. Note that the problem analyzed here is different from previous studies. First, the fixed number of tickets guarantees that the participants know the odds of winning. Second, individual MPCRs are private information. Presentation 2: Contests with Expectation-Based Loss-Averse Players Presenter: Ayse Gul Mermer Abstract: This paper studies a multiple prize contest with expectation-based loss-averse contestants a la Köszegi and Rabin (2006). The predictions of the model is able to align the empirical evidence observed in recent laboratory experiments on effort provision of contestants. More specifically the model predicts that high-ability contestants overexert effort while low-ability contestants exert very little or no effort in comparison to predictions with standard preferences. Moreover, the optimal prize allocation in contests differs markedly in the presence of expectationbased loss aversion. In particular, multiple prizes can become optimal when the cost-of-effort function is linear or concave, where standard preferences predict the optimality of a single prize in these cases. Several unequal prizes might be optimal when the cost-of-effort function is convex. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 22

25 Presentation 3: Linking Conflict to Inequality: The Gini index as a Measure of Rent Dissipation Presenter: Alberto Vesperoni Abstract: We establish a general link between the incentives to exert costly efforts in a conflict and the degree of inequality across the contested resources. Conflict is modelled as a multipleprize contest whose outcome is a ranking of players, where the probabilities of rankings are defined with a consistent extension of the standard single-winner framework. We show that, given any distribution of prizes which is not perfectly egalitarian, there exists a symmetric interior equilibrium where efforts are a linear function of the Gini index of the distribution. Presentation 4: It s Dog Eat Dog - A Model of Multiple Pairwise Contests Presenter: Paul M. Gorny Abstract: I investigate an N-player model in which each player engages in N-1 pairwise component contests against every other player. Under certain assumptions this model can be payoff-equivalent to the ordinary N-player contest. I report observations from a list of simulation exercises. If there is a feud between two players, all neutral players seem to follow the stronger of the two players. The utility of the followers turns out to be higher than that of the leader for small N in all simulations. For asymmetric budgets, players seem to fight those opponents most fiercely that are similarly endowed. All but the poor gain relative to the symmetric case. Increasing N, I observe outcomes to be closer to the fully symmetric case for all parametrizations. Parallel Session 11 (Room 1): Behavioral Aspects (Chair: Judith Avrahami, HUJI) Presentation 1: Compensation and Honesty: Gender Differences in Lying Presenter: Simon Dato Co-author: Petra Nieken Abstract: We compare gender differences in lying under two incentive schemes that are widely used in companies: individual performance-pay and tournament incentives. While we do not observe significantly different behavior of males and females given individual performance-pay, To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 23

26 females lie significantly less than males if the compensation scheme is switched to tournament incentives. This result is mainly driven by a decrease in the propensity to lie of females in a competitive environment. The gender gap in lying is robust with respect to the gender composition of the pool of opponents. Dishonesty is largest for males competing in a mixed-gender environment. Presentation 2: Disappointment Aversion and Interpersonal Comparisons in Tournaments Presenter: Martin Sefton Co-author: Simon Gaechter and Lingbo Huang Abstract: We present an experiment to investigate the source of disappointment aversion in a tournament. Specifically, we investigate whether the disappointment aversion previously identified in a two-person tournament (Gill and Prowse, 2012) reflects asymmetric evaluation of losses and gains (which would play a role in an individual choice context), or whether it depends on interpersonal comparisons. To do this we compare social and asocial versions of the Gill and Prowse experiment, where the latter treatment removes the scope for interpersonal comparisons. In neither treatment do we find evidence of disappointment aversion. Behaviour in social and asocial treatments is similar, suggesting that interpersonal comparisons have little impact on behaviour in this setting. Presenter: Francesco Fallucchi Co-author: Theodore L. Turocy Presentation 3: Learning in Rent-seeking Contests Abstract: We examine experimentally the effects of group size on subjects behaviour in the proportional-prize and winner-take-all contests. In our design subjects compete repeatedly, in groups of either three or five players, under one of the two contest structures. We find that in the proportional-prize contest group/individual expenditures change significantly with the group size, in line with equilibrium predictions. However, in the winner-take-all contest the group size does not affect significantly the level of rent-dissipation, as bigger groups induce a higher proportion of inactive contestants. We propose a modified version of the EWA learning model that takes into account such differences. To attend, or in case of a query contact Subhasish at S.Modak-Chowdhury@uea.ac.uk 24