Best of three contests: experimental evidence

*Andrew Yates
University of Richmond

Roman Sheremeta
Chapman University

Shakun Mago
University of Richmond

     Full text: PDF
     Last modified: November 20, 2010
     Presentation date: 03/12/2011 9:00 AM in NH 1130, Session B
     (View Schedule)

Abstract
We conduct an experimental analysis of a best-of-three Tullock contest. Intermediate prizes lead to higher efforts, while increasing the role of luck (as opposed to effort) leads to lower efforts. Both intermediate prizes and luck reduce the probability of contest ending in two rounds. The patterns of players’ efforts and the probability that a contest ends in two rounds is consistent with ‘strategic momentum’, i.e. momentum generated due to strategic incentives inherent in the contest. We do not find evidence for ‘psychological momentum’, i.e. momentum which emerges when winning affects players’ confidence. Similar to previous studies of contests, we find significantly higher efforts than predicted and strong heterogeneity in effort between subjects.