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Competition Between Friends and Foes

Wladislaw Mill () and John Morgan

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: While social preferences have been shown to be an important predictor in economic decision making it has been largely ignored in describing auction behavior. We build on theoretical models of spiteful bidding to test experimentally whether the rival's type impact bidding behavior in an auction. For that purpose, we collect data on competitions -- in form of first-price auctions -- between Donald Trump and Hillary Clinton voters. We show that the rival's type -- i.e., the competitor supports the same candidate (i.e., friend) or the competitor supports another candidate (i.e., a foe) -- influences auction behavior. Clinton voters compete more aggressively against Trump voters compared to fellow Clinton voters, in line with the theory on spiteful bidding. Trump voters, on the other hand, do not compete more aggressively against Clinton voters compared to fellow Trump voters. This behavior still prevails even if we account for beliefs. Using data on attitudes suggest that spite might be driving this behavior. We conclude that preferences over the opponent seem to influence behavior even in a competitive setting.

Keywords: Spite; Auction; Competition; Experiment; Donald Trump; Hillary Clinton (search for similar items in EconPapers)
JEL-codes: C57 C92 D44 D72 (search for similar items in EconPapers)
Pages: 44
Date: 2020-11
New Economics Papers: this item is included in nep-exp
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