Contests with entry fees : theory and evidence

Duffy, John and Matros, Alexander and Valencia, Zehra (2023) Contests with entry fees : theory and evidence. Review of Economic Design, 27 (4). pp. 725-761. ISSN 1434-4742

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Abstract

We provide some theory and experimental evidence on contests with entry fees. In our setup, players must simultaneously decide whether or not to pay a fee to enter a contest and the amount they wish to bid should they choose to enter the contest. In a general n-bidder game, we show that the addition of contest entry fees increases the contest designer’s expected revenue and that there is a unique revenue maximizing entry fee. In an experimental test of this theory we vary both the entry fee and the number of bidders. We find over-bidding for all entry fees and bidder group sizes, n. We also find under-participation in the contest for low entry fees and over-participation for higher entry fees. In the case of 3 bidders, the revenue maximizing entry fee for the contest designer is found to be significantly greater than the theoretically optimal entry fee. We offer some possible explanations for these departures from theoretical predictions.

Item Type:
Journal Article
Journal or Publication Title:
Review of Economic Design
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000
Subjects:
?? contestsentry feesexperimental economicseconomics, econometrics and finance(all) ??
ID Code:
209832
Deposited By:
Deposited On:
14 Nov 2023 09:10
Refereed?:
Yes
Published?:
Published
Last Modified:
16 Sep 2024 13:10