Entry in contests with incomplete information: Theory and experiments |
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| Affiliation: | 1. Department of Economics, Universidad del Rosario, Bogotá, Colombia;2. Department of Economics and Finance, Utah State University, Logan, UT, USA;1. Cologne Center for Comparative Politics (CCCP), University of Cologne, Herbert-Lewin-Str. 2, 50931, Cologne, Germany;2. Cologne Center for Comparative Politics (CCCP), Cologne Graduate School (CGS), University of Cologne, Herbert-Lewin-Str. 2, 50931, Cologne, Germany;1. Baugh Center for Entrepreneurship & Free Enterprise, Baylor University, USA;2. Department of Economics, Clemson University, USA;1. Louisiana State University and NBER, USA;2. Hasselt University, Belgium;1. Università di Salerno, CSEF, Italy;2. Università degli Studi di Milano, Italy;3. GLO, Essen, Germany |
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| 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. |
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| Keywords: | Contests Endogenous entry Experiments C9 D4 D72 |
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