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An Experiment on Inequality within Groups in Contest

Author

Listed:
  • Mingye Ma

    (University of Southampton)

  • Francesco Trevisan

    (Ca' Foscari University of Venice)

Abstract

We study Tullock contests allowing heterogeneity of both rewards and abilities within the competing groups. Our main concern is whether higher degrees of inequality in a group can improve its performance, namely group effort and probability of winning. First, we show that the answer to this question is positive under plausible conditions on players' cost function. Second, we test these predictions in the lab. Unlike theory predicts, inequality in abilities does not help a team win. Inequality in rewards does help but moderately. The efficient combination of both inequalities, which assigns high rewards to high ability players, substantially increases a team's performance. Finally, through the analysis of subjects' beliefs, we provide empirical evidence that overbidding is more severe than we expected.

Suggested Citation

  • Mingye Ma & Francesco Trevisan, 2023. "An Experiment on Inequality within Groups in Contest," Working Papers 2023: 30, Department of Economics, University of Venice "Ca' Foscari".
    • Handle: RePEc:ven:wpaper:2023:30
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    groups contests; inequality; optimal incentives; experiment;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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