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Endowment Effects in Contests

  • Curtis R. Price

    ()

    (Department of Economics & Finance, College of Business, University of Southern Indiana)

  • Roman M. Sheremeta

    ()

    (Argyros School of Business and Economics, Chapman University)

We design an experiment to test if the manner in which subjects receive the endowment has any bearing on the amount of overbidding in contests. We 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 play important roles in explaining our findings.

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File URL: http://www.chapman.edu/ESI/wp/EndowmentEffectsInContests-Sheremeta.pdf
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Paper provided by Chapman University, Economic Science Institute in its series Working Papers with number 09-07.

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Length: 14 pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:chu:wpaper:09-07
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  1. Sheremeta, Roman M., 2010. "Experimental comparison of multi-stage and one-stage contests," Games and Economic Behavior, Elsevier, vol. 68(2), pages 731-747, March.
  2. Hillman, Arye L & Katz, Eliakim, 1984. "Risk-Averse Rent Seekers and the Social Cost of Monopoly Power," Economic Journal, Royal Economic Society, vol. 94(373), pages 104-10, March.
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  4. Davis, Douglas D & Reilly, Robert J, 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(1-2), pages 89-115, April.
  5. Gneezy, Uri & Smorodinsky, Rann, 2006. "All-pay auctions--an experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 61(2), pages 255-275, October.
  6. Roman M. Sheremeta & Jingjing Zhang, 2009. "Can Groups Solve the Problem of Overbidding in Contests?," Department of Economics Working Papers 2009-05, McMaster University.
  7. 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.
  8. Roman M. Sheremeta, 2009. "Contest Design: An Experimental Investigation," Working Papers 09-05, Chapman University, Economic Science Institute.
  9. Potters, Jan & de Vries, Casper G. & van Winden, Frans, 1998. "An experimental examination of rational rent-seeking," European Journal of Political Economy, Elsevier, vol. 14(4), pages 783-800, November.
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  11. 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.
  12. 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.
  13. Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, vol. 36(6), pages 643-660, June.
  14. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  15. 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.
  16. Yasar Barut & Dan Kovenock & Charles N. Noussair, 2002. "A Comparison of Multiple-Unit All-Pay and Winner-Pay Auctions Under Incomplete Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 675-708, August.
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