To Tender or Not to Tender? Deliberate and Exogenous Sunk Costs in a Public Good Game

Florian Heine and Martin Sefton
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Florian Heine: Tilburg Institute of Governance, Tilburg University School of Economics and Management, P.O. Box 90153, 5000 LE Tilburg, The Netherlands

Games, 2018, vol. 9, issue 3, 1-28

Abstract: In an experimental study, we compare individual willingness to cooperate in a public good game after an initial team contest phase. While players in the treatment setup make a conscious decision on how much to invest in the contest, this decision is exogenously imposed on players in the control setup. As such, both groups of players incur sunk costs and enter the public good game with different wealth levels. Our results indicate that the way these sunk costs have been accrued matters especially for groups on the losing side of the contest: Given the same level of sunk costs, contributions to the public good are lower for groups which failed to be successful in the preceding between-group contest. Furthermore, this detrimental effect is more pronounced for individuals who play a contest with deliberate contributions before.

Keywords: sunk costs; public good; contest; experiment (search for similar items in EconPapers)
JEL-codes: C C7 C70 C71 C72 C73 (search for similar items in EconPapers)
Date: 2018
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