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Impulsive Behavior in Competition: Testing Theories of Overbidding in Rent-Seeking Contests

53 Pages Posted: 20 Oct 2015 Last revised: 15 Sep 2016

Roman M. Sheremeta

Case Western Reserve University

Date Written: September 14, 2016

Abstract

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

Sheremeta, Roman M., Impulsive Behavior in Competition: Testing Theories of Overbidding in Rent-Seeking Contests (September 14, 2016). Available at SSRN: https://ssrn.com/abstract=2676419

Roman M. Sheremeta (Contact Author)

Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106
United States

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