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Endowment effects in contests

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  • Price, Curtis R.
  • Sheremeta, Roman M.

Abstract

We experimentally study overbidding in contests and find that overbidding is significantly higher when subjects are given a large per-experiment endowment rather than when the endowment is given per-period. Risk-aversion and non-monetary utility of winning can partially explain our findings.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 111 (2011)
Issue (Month): 3 (June)
Pages: 217-219

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Handle: RePEc:eee:ecolet:v:111:y:2011:i:3:p:217-219

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Rent-seeking Contest Experiments Overbidding Endowment;

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References

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  1. Roman M. Sheremeta, 2009. "Experimental Comparison of Multi-Stage and One-Stage Contests," Working Papers 09-04, Chapman University, Economic Science Institute.
  2. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
  3. Jan Potters & Casper G. de Vries & Frans van Winden, 1998. "An Experimental Examination of Rational Rent-Seeking," Tinbergen Institute Discussion Papers 98-068/1, Tinbergen Institute.
  4. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  5. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  6. Gneezy, Uri & Smorodinsky, Rann, 2006. "All-pay auctions--an experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 61(2), pages 255-275, October.
  7. Noussair, Charles & Silver, Jonathon, 2006. "Behavior in all-pay auctions with incomplete information," Games and Economic Behavior, Elsevier, vol. 55(1), pages 189-206, April.
  8. Douglas Davis & Robert Reilly, 1998. "Do too many cooks always spoil the stew? An experimental analysis of rent-seeking and the role of a strategic buyer," Public Choice, Springer, vol. 95(1), pages 89-115, April.
  9. Merlo, A. & Schotter, A., 1995. "A Surprise-Quiz View of Learning in Economic Experiments," Working Papers 95-32, C.V. Starr Center for Applied Economics, New York University.
  10. Anderson, Lisa R & Stafford, Sarah L, 2003. " An Experimental Analysis of Rent Seeking under Varying Competitive Conditions," Public Choice, Springer, vol. 115(1-2), pages 199-216, April.
  11. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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Citations

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Cited by:
  1. Changxia Ke & Kai A. Konrad & Florian Morath, 2012. "Alliances in the Shadow of Conflict," CESifo Working Paper Series 4056, CESifo Group Munich.
  2. Francesco Fallucchi & Elke Renner & Martin Sefton, 2012. "Information Feedback and Contest Structure in Rent-Seeking Games," Discussion Papers 2012-12, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  3. Curtis R. Price & Roman M. Sheremeta, 2012. "Endowment Origin, Demographic Effects and Individual Preferences in Contests," Working Papers 12-07, Chapman University, Economic Science Institute.
  4. Shakun D. Mago & Roman M. Sheremeta & Andrew Yates, 2012. "Best-of-Three Contest Experiments: Strategic versus Psychological Momentum," Working Papers 12-30, Chapman University, Economic Science Institute.
  5. Shakun D. Mago & Anya C. Savikhin & Roman M. Sheremeta, 2012. "Facing Your Opponents: Social identification and information feedback in contests," Working Papers 12-15, Chapman University, Economic Science Institute.
  6. Subhasish M. Chowdhury & Roman M. Sheremeta & Theodore L. Turocy, 2012. "Overdissipation and Convergence in Rent-seeking Experiments: Cost structure and prize allocation rules," Working Papers 12-13, Chapman University, Economic Science Institute.
  7. Sheremeta, Roman, 2013. "Overbidding and Heterogeneous Behavior in Contest Experiments," MPRA Paper 44124, University Library of Munich, Germany.
  8. Roman M. Sheremeta & William A. Masters & Timothy N. Cason, 2012. "Winner-Take-All and Proportional-Prize Contests: Theory and Experimental Results," Working Papers 12-04, Chapman University, Economic Science Institute.
  9. Erik O. Kimbrough & Roman M. Sheremeta, 2012. "Side-Payments and the Costs of Conflict," Working Papers 12-01, Chapman University, Economic Science Institute.
  10. Shakun D. Mago & Roman M. Sheremeta, 2012. "Multi-Battle Contests: An Experimental Study," Working Papers 12-06, Chapman University, Economic Science Institute.

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