Group Escalation in All-Pay Contests: The Role of Shared Beliefs and Norm Enforcement

Deck and Sheremeta (2015) document over-expenditure and strategic anomalies in contest settings like tug-of-war. Wang et al. (2018) show that individual decisions within groups are shaped by networked interdependence, and propose “virtual public players” to coordinate. We design lab and online experiments where teams compete in all-pay contests with: (a) within-team communication; (b) norm elicitation about “fair effort” and “acceptable aggression”; and (c) exogenous “virtual public player” signals that recommend equilibrium-consistent contributions. We predict groups with stronger injunctive norms or identity salience escalate bids beyond Nash predictions due to peer monitoring and reputational stakes, while coordination signals can de-escalate—unless they violate emergent group norms. Process measures (decision time, chat sentiment) feed evidence-accumulation models (Gopnarayan et al., 2023) to quantify latent conflict during escalation. Novelty: integrates norm elicitation, group coordination devices, and process modeling into contest theory, explaining persistent overbidding as a norm-driven, reputation-mediated deviation rather than mere risk preference or noise. Impact: informs design of R&D tournaments, political lobbying caps, and platform competitions where group identity and norms amplify waste.

References:

1. Tug-of-War in the Laboratory. Cary A. Deck, Roman M. Sheremeta (2015).
2. The Interdependence between Individual and Group Decision-M aking with Applications in Chinese Stock Market. Guocheng Wang, Bingxue Wang, Shiguo Zhang (2018). Journal of Business and Economics.
3. From DDMs to DNNs: Using process data and models of decision-making to improve human-AI interactions. Mrugsen Nagsen Gopnarayan, Jaan Aru, S. Gluth (2023). Decision.