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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Sequential contests with incomplete information
T2 - Theory and experimental evidence
AU - Brookins, Philip
AU - Matros, Alexander
AU - Tzachrista, Foteini
PY - 2025/1/31
Y1 - 2025/1/31
N2 - We investigate behavior in two-player sequential-move contests with complete and incomplete information about the value of the prize. First, we describe a Bayesian equilibrium in which both players have private prize values. Then, we test our predictions in the experimental laboratory. We analyze three settings: symmetric prize valuations with complete information, asymmetric prize valuations with complete information, and asymmetric prize valuations with incomplete information. We find that subjects’ behavior is less consistent with theory and more in line with simple mental shortcuts. Our data supports a simple investment heuristic for each player type. On average, first-movers invest half of their own valuation and second-movers, regardless of their prize valuation, invest frequently in one of the following ways: drop out of the contest or invest at or just above the first-movers’ investment. We add to the growing literature by showing that experimental contest data can be better explained by simple heuristics.
AB - We investigate behavior in two-player sequential-move contests with complete and incomplete information about the value of the prize. First, we describe a Bayesian equilibrium in which both players have private prize values. Then, we test our predictions in the experimental laboratory. We analyze three settings: symmetric prize valuations with complete information, asymmetric prize valuations with complete information, and asymmetric prize valuations with incomplete information. We find that subjects’ behavior is less consistent with theory and more in line with simple mental shortcuts. Our data supports a simple investment heuristic for each player type. On average, first-movers invest half of their own valuation and second-movers, regardless of their prize valuation, invest frequently in one of the following ways: drop out of the contest or invest at or just above the first-movers’ investment. We add to the growing literature by showing that experimental contest data can be better explained by simple heuristics.
U2 - 10.1016/j.jebo.2024.106808
DO - 10.1016/j.jebo.2024.106808
M3 - Journal article
VL - 229
JO - Journal of Economic Behavior and Organization
JF - Journal of Economic Behavior and Organization
SN - 0167-2681
M1 - 106808
ER -