Understanding Over Participation in Simple Contests

One key motivation for using contests in real-life is the substantial evidence reported in empirical contest-design literature for people's tendency to act more competitively in contests than predicted by the Nash Equilibrium. This phenomenon has been traditionally explained by people's eagerness to win and maximize their relative (rather than absolute) payoffs. In this paper we make use of "simple contests," where contestants only need to strategize on whether to participate in the contest or not, as an infrastructure for studying whether indeed more effort is exerted in contests due to competitiveness, or perhaps this can be attributed to other factors that hold also in non-competitive settings. The experimental methodology we use compares contestants' participation decisions in eight contest settings differing in the nature of the contest used, the number of contestants used and the theoretical participation predictions to those obtained (whenever applicable) by subjects facing equivalent non-competitive decision situations in the form of a lottery. We show that indeed people tend to over-participate in contests compared to the theoretical predictions, yet the same phenomenon holds (to a similar extent) also in the equivalent non-competitive settings. Meaning that many of the contests used nowadays as a means for inducing extra human effort, that are often complex to organize and manage, can be replaced by a simpler non-competitive mechanism that uses probabilistic prizes.