Endowment Origin, Demographic Effects and Individual Preferences in Contests

Curtis Price () and Roman Sheremeta

Working Papers from Chapman University, Economic Science Institute

Abstract: In modern firms the use of contests as an incentive device is ubiquitous. Nonetheless, recent experimental research shows that in the laboratory subjects routinely make suboptimal decisions in contests even to the extent of making negative returns. The purpose of this study is to investigate if changing how agents are endowed with resources can increase the efficiency in contests. To this end, we conduct a laboratory experiment in which subjects are asked to allot costly resources (bids) in an effort to attain an award (prize). In line with other laboratory studies of contests, our results show that subjects overbid relative to theoretical predictions and incur substantial losses as a result. Making subjects earn their initial resource endowments mitigates the amount of overbidding and thus increases overall efficiency. Overbidding is also linked to gender with women bidding higher than men and having lower average earnings. Other demographic information such as religiosity and individual preferences towards winning and risk also contribute to excessive bidding.

Keywords: contest; experiments; overbidding; endowment; gender; religiosity (search for similar items in EconPapers)
JEL-codes: C72 C91 D61 D72 J16 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2012
New Economics Papers: this item is included in nep-cbe, nep-evo and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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http://www.chapman.edu/research-and-institutions/e ... endowment-origin.pdf (application/pdf)

Related works:
Journal Article: Endowment Origin, Demographic Effects, and Individual Preferences in Contests (2015)
Working Paper: Endowment Origin, Demographic Effects and Individual Preferences in Contests (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:12-07

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