NSF Award
0089182
R&D competitions, election campaigns, litigation, sport competitions, and all-pay auctions all have a common theme. In these situations individual agents or groups of agents compete with one another by expending limited resources in an attempt to win an exogenously determined prize. Contributions to the theoretical literature on such contests come from economics, political science, organizational theory, marketing, and strategic management. <br/> In contrast to the rapidly growing body of theoretical literature, there have been very few empirical studies designed to test the implications of the various models. We propose extending the theoretical literature as well as experimentally testing the implications of our models. Six experiments are proposed. Two experiments on multi-player contests extend our previous investigation to n (n>2) firms competing in the development of a new technology product. Both the cases of symmetric and asymmetric firms are examined. Two additional experiments on multi-level contests extend the investigation to situations that allow simultaneously for within-group conflicts and between-group competitions. These situations occur frequently in inter-organizational conflicts that elicit free riding within the competing groups. We propose to investigate the effects of different rules for sharing the prize on the level of individual contribution, and the effects of unequal group sizes. The final two experiments on multi-stage contests extend the investigation in yet another direction to within-group competitions with shortlisting in which the number of contestants decreases from stage to stage (e.g., NBA championship).<br/> Our research program is mostly driven by the game theoretic solution concepts of Nash equilibrium and subgame perfect equilibrium. The insights gained from analyzing the behavioral patterns uncovered in the proposed experiments should help in 1) assessing the descriptive power of these solution concepts, 2) stimulating new theoretical and experimental research, and 3) applying the findings to the design of optimal contests.
