Excess Entry in an Experimental Winner-Take-All Market
"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 the functioning of such markets with the help of experiments 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. We discuss several concepts that might explain the observed excess entry.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: Schönberggasse 1, CH-8001 Zürich|
Phone: +41-1-634 21 37
Fax: +41-1-634 49 82
Web page: http://www.econ.uzh.ch/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- R. Mark Isaac & Duncan James, 2000. "Asset Markets: How They Are Affected by Tournament Incentives for Individuals," American Economic Review, American Economic Association, vol. 90(4), pages 995-1004, September.
- Wulf Albers & Robin Pope & Reinhard Selten & Bodo Vogt, 1999.
"Experimental Evidence for Attractions to Chance,"
Center for Mathematical Economics Working Papers
317, Center for Mathematical Economics, Bielefeld University.
- Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2004.
"Two are few and four are many: number effects in experimental oligopolies,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 53(4), pages 435-446, April.
- Steffen Huck & Hans-Theo Normann & Jörg Oechssler, 2001. "Two are Few and Four are Many: Number Effects in Experimental Oligopolies," Bonn Econ Discussion Papers bgse12_2001, University of Bonn, Germany.
- Palfrey, Thomas R. & Goeree, Jacob & Holt, Charles, 2000.
"Quantal Response Equilibrium and Overbidding in Private-value Auctions,"
1073, California Institute of Technology, Division of the Humanities and Social Sciences.
- Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2002. "Quantal Response Equilibrium and Overbidding in Private-Value Auctions," Journal of Economic Theory, Elsevier, vol. 104(1), pages 247-272, May.
- Jacob K. Goeree & Charles A. Holt & Thomas R. Palfrey, 2000. "Quantal Response Equilibrium and Overbidding in Private-Value Auctions," Virginia Economics Online Papers 345, University of Virginia, Department of Economics.
- Harbring, Christine & Irlenbusch, Bernd, 2003. "An experimental study on tournament design," Labour Economics, Elsevier, vol. 10(4), pages 443-464, August.
- Matthew Rabin, 2000.
"Risk Aversion and Expected-Utility Theory: A Calibration Theorem,"
Econometric Society, vol. 68(5), pages 1281-1292, September.
- Rabin, Matthew, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Department of Economics, Working Paper Series qt731230f8, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Matthew Rabin, 2001. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Method and Hist of Econ Thought 0012001, EconWPA.
- Matthew Rabin, 2001. "Risk Aversion and Expected Utility Theory: A Calibration Theorem," Levine's Working Paper Archive 7667, David K. Levine.
- Matthew Rabin., 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Economics Working Papers E00-279, University of California at Berkeley.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Amnon Rapoport & Darryl A. Seale & Ido Erev & James A. Sundali, 1998. "Equilibrium Play in Large Group Market Entry Games," Management Science, INFORMS, vol. 44(1), pages 119-141, January.
- Selten, Reinhard & Abdolkarim Sadrieh & Klaus Abbink, 1995.
"Money does Not Induce Risk Neutral Behavior, but Binary Lotteries Do even Worse,"
Discussion Paper Serie B
343, University of Bonn, Germany.
- Reinhard Selten & Abdolkarim Sadrieh & Klaus Abbink, 1999. "Money Does Not Induce Risk Neutral Behavior, but Binary Lotteries Do even Worse," Theory and Decision, Springer, vol. 46(3), pages 213-252, June.
- Harrison, Glenn W, 1992. "Theory and Misbehavior of First-Price Auctions: Reply," American Economic Review, American Economic Association, vol. 82(5), pages 1426-43, December.
- Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1985.
"Tournaments and Piece Rates: An Experimental Study,"
85-21, C.V. Starr Center for Applied Economics, New York University.
- Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987. "Tournaments and Piece Rates: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 1-33, February.
- Edward P. Lazear & Sherwin Rosen, 1979.
"Rank-Order Tournaments as Optimum Labor Contracts,"
NBER Working Papers
0401, National Bureau of Economic Research, Inc.
- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-91, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Vital Anderhub & Werner GÃ¤uth & Wieland MÃ¤uller & Martin Strobel, 2000. "An Experimental Analysis of Intertemporal Allocation Behavior," Experimental Economics, Springer, vol. 3(2), pages 137-152, October.
- R. M. Isaac & J. M. Walker, 2010.
"Group size effects in public goods provision: The voluntary contribution mechanism,"
Levine's Working Paper Archive
310, David K. Levine.
- R. Mark Isaac & James M. Walker, 1988. "Group Size Effects in Public Goods Provision: The Voluntary Contributions Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 103(1), pages 179-199.
- Sundali, James A. & Rapoport, Amnon & Seale, Darryl A., 1995. "Coordination in Market Entry Games with Symmetric Players," Organizational Behavior and Human Decision Processes, Elsevier, vol. 64(2), pages 203-218, November.
- Dan Lovallo & Colin Camerer, 1999. "Overconfidence and Excess Entry: An Experimental Approach," American Economic Review, American Economic Association, vol. 89(1), pages 306-318, March.
- Anderson, Simon P. & Goeree, Jacob K. & Holt, Charles A., 2008. "Logit Equilibrium Models of Anomalous Behavior: What to do when the Nash Equilibrium Says One Thing and the Data Say Something Else," Handbook of Experimental Economics Results, Elsevier.
- C. Monica Capra, 1999. "Anomalous Behavior in a Traveler's Dilemma?," American Economic Review, American Economic Association, vol. 89(3), pages 678-690, June.
- McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
- Charles A. Holt & Jacob K. Goeree, 1999. "Stochastic Game Theory: For Playing Games, Not Just for Doing Theory," Virginia Economics Online Papers 306, University of Virginia, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:zur:iewwpx:086. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser)
If references are entirely missing, you can add them using this form.