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Level-k Models Rationalize Overspending in Contests

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  • Malin Arve
  • Marco Serena

Abstract

The experimental evidence on contests often reports overspending of subjects as opposed to the Nash equilibrium. Explaining such phenomenon is a long-standing research question. We complement the alternative explanations proposed by the literature by providing a theoretical rationale for overspending which is based on the level-k model. This also bridges an open gap between the contest and auction literatures.

Suggested Citation

  • Malin Arve & Marco Serena, 2016. "Level-k Models Rationalize Overspending in Contests," Working Papers tax-mpg-rps-2018-09, Max Planck Institute for Tax Law and Public Finance.
    • Handle: RePEc:mpi:wpaper:tax-mpg-rps-2018-09
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    References listed on IDEAS

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    More about this item

    Keywords

    Contest; Level-k reasoning;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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