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Endowment Effects in Contests

  • Price, Curtis
  • Sheremeta, Roman

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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 52103.

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Date of creation: 2011
Date of revision:
Handle: RePEc:pra:mprapa:52103
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  1. 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.
  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.
  3. 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.
  4. Roman M. Sheremeta, 2009. "Experimental Comparison of Multi-Stage and One-Stage Contests," Working Papers 09-04, Chapman University, Economic Science Institute.
  5. Potters, J.J.M. & de Vries, C.G. & van Winden, F.A.A.M., 1998. "An experimental examination of rational rentseeking," Other publications TiSEM 496ad30e-8453-4c83-a5e1-5, Tilburg University, School of Economics and Management.
  6. 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.
  7. Gneezy, Uri & Smorodinsky, Rann, 2006. "All-pay auctions--an experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 61(2), pages 255-275, October.
  8. Roman M. Sheremeta, 2009. "Contest Design: An Experimental Investigation," Working Papers 09-05, Chapman University, Economic Science Institute.
  9. Sheremeta, Roman & Zhang, Jingjing, 2009. "Can Groups Solve the Problem of Over-Bidding in Contests?," MPRA Paper 49885, University Library of Munich, Germany.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. 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.
  15. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  16. 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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