Who are We Up Against? Heterogeneous Group Contests with Incomplete Information

This study examines how behavior in inter-group contests is altered when players have incomplete information on their opponent. We model a Tullock contest where there are two possible types of groups that are heterogeneous in the incentives they face, and players only know the probability their opponent is a particular group type. In the theory and complementary experiment, we compare three sources of heterogeneity – differences in cost-of-effort, prize value, and group size. For the cost and value treatments, we find that incomplete information increases effort in uneven contests but has no effect on average in even contests. Group-level effort is higher in group size treatments, but incomplete information does not systematically alter effort. Consistent with prior research on group contests, observed effort is systematically higher than what theory predicts. An extended theory model that incorporates in-group altruism (and possibly a non-monetary utility of winning) may explain some deviations between the data and standard theory, including the finding that group-level effort increases with group size. Moreover, bounded rationality may explain some of the effects of incomplete information