Affirmative Action and Retaliation in Experimental Contests

Abstract

We conduct a real-effort experiment to test the effects of an affirmative action policy that reserves a share of the prize to subjects of a disadvantaged category in rent-seeking contests.

We test three potential pitfalls of the affirmative action policy:

(i) whether the introduction of the policy distorts effort and selection in the contest,

(ii) whether it leads to reverse discrimination and

(iii) whether the possibility of ex-post retaliatory actions undermines the effectiveness of the policy.

We find that the affirmative action contest increases entry of players from the disadvantaged category without affecting entry of advantaged players. However, we find that the possibility of retaliation can undermine the benefits of the affirmative action policy reducing contest participation. This suggests that retaliation is an important aspect to consider when implementing affirmative action policies.

Keywords: rent-seeking, contest design, affirmative action, retaliation

JEL Classification: C72, D72, J78