In cutthroat markets, just letting the players talk to each other fixes waste better than changing the prize money.
Economists usually assume that to change behavior, you have to change the money (the 'incentive structure'). This study found that 'lightweight' interventions like simple communication and feedback were better at stopping people from overcrowding a market than redesigning the actual prize money.
Efficiency and Equity in an Experimental Repeated Entry Game
SSRN · 6323919
Motivated by the prevalence of competitive environments in which the same set of players face recurring entry decisions against one another, we experimentally study efficiency and equity in a repeated entry game. Analyzing 16,352 decisions from 511 subjects in 73 repeated entry games, we vary the prize structure (winner-take-all versus proportional), ability heterogeneity, the salience of performance feedback, and the availability of communication. Entry remains persistently above the efficient