Impulsive Behavior in Competition: Testing Theories of Overbidding in Rent-Seeking Contests
53 Pages Posted: 20 Oct 2015 Last revised: 15 Sep 2016
Date Written: September 14, 2016
Researchers have proposed various theories to explain overbidding in rent-seeking contents, including mistakes, systematic biases, the utility of winning, and relative payoff maximization. Through an eight-part experiment, we test and find significant support for the existing theories. Also, we discover some new explanations based on cognitive ability and impulsive behavior. Out of all explanations examined, we find that impulsivity is the most important factor explaining overbidding in contests.
Keywords: rent-seeking, contest, competition, impulsive behavior, experiments
JEL Classification: C72, C91, D01, D72
Suggested Citation: Suggested Citation