Abstract

http://ssrn.com/abstract=2030470
 
 

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Endowment Origin, Demographic Effects and Individual Preferences in Contests


Curtis R. Price


University of Southern Indiana - School of Business

Roman M. Sheremeta


Case Western Reserve University; Case Western Reserve University

March 28, 2012


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.

Number of Pages in PDF File: 30

Keywords: contest, experiments, overbidding, endowment, gender, religiosity

JEL Classification: C72, C91, D61, D72, J16

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Date posted: March 29, 2012  

Suggested Citation

Price, Curtis R. and Sheremeta, Roman M., Endowment Origin, Demographic Effects and Individual Preferences in Contests (March 28, 2012). Available at SSRN: http://ssrn.com/abstract=2030470 or http://dx.doi.org/10.2139/ssrn.2030470

Contact Information

Curtis R. Price
University of Southern Indiana - School of Business ( email )
Evansville, IN 47712
United States
Roman M. Sheremeta (Contact Author)
Case Western Reserve University ( email )
10900 Euclid Ave.
Cleveland, OH 44106
United States
Case Western Reserve University ( email )
Cleveland, CA 44106
United States
(216) 368-4271 (Phone)
HOME PAGE: http://sites.google.com/site/romansheremeta/
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