CeDEx Brown Bag Seminar - Stephan Jagau

Title: Selection Pressure in Repeated Contests

Abstract: Competition for scarce resources in the face of birth and death (the struggle for survival) has shaped social and economic interaction since the beginnings of mankind. This research is the first to induce selection pressure in controlled strategic decision-making experiments using performance-based replacement of participants over time. Strategic decision-making with and without selection pressure is considered in repeated Tullock-type rent seeking contests. Tullock contests' incentive structure drives a wedge between profit maximization and survival. Moreover, there is a large number of past experiments without selection pressure demonstrating a willingness to compete that cannot be justified by profit maximization alone and thus seemingly supports evolutionary game-theoretic predictions. Surprisingly, we find that the intensity of competition in repeated contests does in fact decrease once selection pressure is added. Participants' behavior under selection pressure is well-approximated by the finite population evolutionarily stable strategy (ESS) of the stage game. This happens because a significant share of contestants quickly adapt to survive under selection pressure at the expense of new entrants. By contrast, when selection pressure is absent, we observe a large variance in competitiveness and frequent competition far beyond profit-maximizing levels. Selection pressure has a disciplining effect on contestants' decision-making, boosting not only the lifespans of successful contestants but also average round payoffs across the entire population.