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Loss Aversion and Rent-Seeking: An Experimental Study

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  • Xiaojing Kong
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    Abstract

    We report an experiment designed to evaluate the impact of loss aversion on rent-seeking contests. We find, as theoretically predicted, a negative relationship between rent-seeking expenditures and loss aversion. However, for any degree of loss aversion, levels of rent-seeking expenditure are higher than predicted. Moreover, we find that the effect of loss aversion becomes weaker with repetition of the contest.

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    File URL: http://www.nottingham.ac.uk/cedex/documents/papers/2008-13.pdf
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    Bibliographic Info

    Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2008-13.

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    Date of creation: Oct 2008
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    Handle: RePEc:not:notcdx:2008-13

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    Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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    Web page: http://www.nottingham.ac.uk/economics/cedex/
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    Cited by:
    1. Faravelli, Marco & Stanca, Luca, 2012. "When less is more: Rationing and rent dissipation in stochastic contests," Games and Economic Behavior, Elsevier, vol. 74(1), pages 170-183.
    2. Roman M. Sheremeta, 2013. "Overbidding and Heterogeneous Behavior in Contest Experiments," Working Papers 13-06, Chapman University, Economic Science Institute.

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