Group contests are ubiquitous. Some examples include warfare between countries, competition between political parties, team-incentives within firms, group sports, and rent-seeking. In order to succeed, members of the same group have incentives to cooperate with each other by expending individual efforts. However, since effort is costly, each member also has an incentive to abstain from expending any effort and instead free-ride on the efforts of other members. Contest theory shows that the intensity of competition between groups and the amount of free-riding within groups depend on the group size, sharing rule, group impact function, contest success function, and heterogeneity of players. We review experimental studies testing these theoretical predictions. Almost all studies of behavior in group contests find significant over-expenditure of effort relative to the theory. We discuss potential explanations for such over-expenditure, including the utility of winning, bounded rationality, relative payoff maximization, parochial altruism, and social identity. Despite over-expenditure, most studies find support for the comparative statics predictions of the theory (with the exception of the “group size paradox”). Finally, studies show that there are effective mechanisms that can promote within-group cooperation and conflict resolution mechanisms that can de-escalate and potentially eliminate between-group conflict.
Sheremeta, R. (2015). Behavior in group contests: A review of experimental research. ESI Working Paper 15-21. Retrieved from http://digitalcommons.chapman.edu/esi_working_papers/170