We design an experiment to study investment behavior in different repeated contest settings, varying the uncertainty of the outcomes and the number of participants in contests. We find decreasing over-expenditures and a higher rate of ‘drop out’ in contests with high uncertainty over outcomes (winner-take-all contests), while we detect a quick convergence towards equilibrium predictions and a near to full participation when this type of uncertainty vanishes (proportional-prize contests). These results are robust to changes in the number of contestants. A learning parameter estimation using the experience-weighted attraction (EWA) model suggests that subjects adopt different learning modes across different contest structures and helps to explain expenditure patterns deviating from theoretical predictions.
- Experience-weighted attraction