Best-of-three contest experiments: Strategic versus psychological momentum

• Published in: International journal of industrial organization Vol. 31; no. 3; pp. 287 - 296
• Main Authors: Mago, Shakun D., Sheremeta, Roman M., Yates, Andrew
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.05.2013; Elsevier Sequoia S.A
• Subjects: Athletes; Best-of-three contest; Confidence; Economic incentives; Economic psychology; Experiments; Game theory; Incentives; Model testing; Probability; Psychological aspects; Psychological momentum; Strategic momentum; Studies; Strategic momentum; C91; Best-of-three contest; Psychological momentum; Experiments; D72; C72
• ISSN: 0167-7187; 1873-7986
• DOI: 10.1016/j.ijindorg.2012.11.006

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 the contest ending in two rounds. The patterns of players' efforts and the probability that a contest ends in two rounds are consistent with ‘strategic momentum’, i.e., a momentum generated due to strategic incentives inherent in the contest. We do not find evidence for ‘psychological momentum’, i.e., a momentum which emerges when winning affects players' confidence. Similar to the previous studies of contests, we find significantly higher efforts than predicted and strong heterogeneity in effort between the subjects. ► We conduct an experimental analysis of a best-of-three Tullock contest. ► Intermediate prizes lead to higher efforts. ► Increasing the role of luck leads to lower efforts. ► Both intermediate prizes & luck reduce probability of contest ending in 2 rounds. ► Pattern of efforts is consistent with strategic (not psychological) momentum.