Excess entry in an experimental winner-take-all market
Abstract"Winner-take-all" markets (i.e., markets in which the relative and not the absolute performance is decisive) have gained in importance. Such markets have a tendency to provoke inefficiently many entries. We investigate such markets in an experiment and show that there are even more inefficient entries than predicted by the Nash equilibrium. Moreover, this effect increases with group size. Quantal response equilibrium predicts the increase in group size but fails to predict the excess entry in the smaller group. We show that the excess entry is not caused by coordination failures. Furthermore, individual entry behavior is not significantly linked to risk preferences.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Behavior & Organization.
Volume (Year): 67 (2008)
Issue (Month): 1 (July)
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Other versions of this item:
- Urs Fischbacher & Christian Thöni, . "Excess Entry in an Experimental Winner-Take-All Market," IEW - Working Papers 086, Institute for Empirical Research in Economics - University of Zurich.
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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