Productive and Destructive Group Contests: An Experimental Investigation

Abstract

In this study, we experimentally test the theoretical results of a contest game between groups when the value of the prize is fixed and when it is endogenously determined. It can decrease with contest efforts of all groups as in the case of an armed conflict or a lawsuit. The value of the prize can also increase with contest efforts as in the case of a patent race. We also analyze the impact of different groupings of players on contest efforts. We observe overinvestment and no negative effect of group size whether the prize value is exogenous or endogenous. Also, a productive contest seems to have no positive effect on individual investments. A destructive contest, however, does have a significant negative impact, but this effect is reduced with a larger number of competing groups.